American Magazine | Fall 2006
Dollars and Sense
Setting the rules at the bank of Mom and Dad
The plea is familiar. It’s so common, in fact, that one of the earliest writings connected with AU is a plaintive note penned by future AU founder John Fletcher Hurst in 1854. “Have received a letter from Uncle John. It was nearer a lecture than a letter upon the subject of my extravagance,” lamented the 20-year-old Hurst. “But Seniors do require money, especially when they sport among the girls.”
Neale Godfrey ’72 would have known exactly what to tell the hapless Hurst. The best-selling author and financial advice columnist was one of the first woman executives of Chase Manhattan Bank and president of the First Women’s Bank. She founded the First Children’s Bank and Children’s Financial Network to promote financial literacy, authored a school curriculum on money, and is a frequent guest on the Oprah Winfrey Show, Good Morning America, and the Today show.
She also has college-age children herself. And she knows that, for too many young people, college is a quick course in Debt 101. What can parents do to prepare students for the realities of adulthood? Godfrey shares her tips with other parents.
Q: Ideally, children will have learned about money and budgeting before they go off to college. But what if they haven’t? What can be done if they’ve already gone off to college, and parents realize their kids don’t know as much as they should about money?
A: It’s never too late. It just makes it harder. With any kid, you have to sit down and build a budget. Get them involved. The way I build a budget with [college-age] kids is, ‘You tell me what you think you need.’ Rather than, ‘This is the amount.’ Let them come and negotiate.
Then, as parents, we can say, ‘OK, this is what I’m willing to pay for. I’m not willing to pay for 82 cups of coffee. I’m paying for your cafeteria food, so you need to get your body there.’ You as a parent decide what you’re willing to do. How many jeans do you need? I’ll pay to buy them at Gap. If you want to shop at Nieman Marcus, you’re more than welcome to, but you’re paying for that.
As a parent, it’s putting your foot down.
Also, do not hand them a credit card, because they’ll use it.
They will be solicited for cards. You’re not really in control of that. I don’t mind that they’re being solicited. A credit card is a valuable tool. But unless they know how to handle it, it’s like handing them the keys to a car without driver’s ed. They need to know that if you borrow $2,000 on a card and pay the minimum, it’s going to take you about 15 years to pay it off, and you’re going to pay for it at least twice.
[Last year] 180,000 young adults between18 and 24 declared bankruptcy, and I believe those are only the ones whose parents wouldn’t or couldn’t bail them out. We have more people declare bankruptcy [each year] than graduate from college. Kids can profoundly get themselves in trouble.
Q:What are the expenses that students and parents tend to leave out of the budget or underestimate?
A: Travel. If you can afford it and you want the kids to come home, figure out how many times a year, and what that’s going to cost.
Also, just general living stuff. You didn’t think about buying shampoo, because that was always supplied at home. Sure, you stock them up going in, but then they’ve got to buy it.
The other thing is, they may feel they’re entitled to the entertainment of going out a couple times a week. That newfound freedom, unfortunately, has a price tag. Even [a night at the movies] today could be $20, and there are clubs that a lot of these kids can go to. You really have to sit down and say, ‘I’m paying for maybe one night a week. I’ll pay $25, and not more than that.’
Q:What about the practicalities of getting money to students? How often is it best to send it?
A: Do not put money in their account per semester. Put them on a shorter string. Make them come back to you, so you know where the money’s going. You don’t want them to have access to lots of cash at once, because they’ll spend it.
I like once a month. You can do an automatic transfer and tell them they need to account for what’s going on. Keep receipts. They’ll grumble. They’re not going to want to do it. But you want them checking back in. You can load a cash card . . . and then you say, ‘I’m sorry, unless you [report how it’s spent], I’m not loading for next month.’ Try that for one month and these kids all of a sudden will be back with a budget.
Money in, money out. Carry a three by five file card, and show me where you spent it. It’s the ‘No Magic Money Log.’ There’s no magic to it. You spent it, it went somewhere. I’m not filling in for ‘I don’t know.’ Nobody picked your pocket. Tell me where you spent it. We count calories, we count carbs, we count all those things, we can count money.
If you raised them this way, it’s no big deal. If it’s the first time, it’s a shock.
Q: At college, kids will have peers from many different backgrounds, and not everyone is getting the same amount of money from home. Are there problems this can lead to? How can students be prepared?
A: Level with them. They need to be empowered to say to kids who are more affluent, ‘You know what? I can’t afford it.’ And wealthy kids need to be empowered to say to other kids, ‘Let’s pick someplace we can all afford.’
I just did a seminar, and [some parents said they] were sending $500 a week. Other parents sat there going, ‘You’re kidding, right?’ Even if you can afford it, do you really want your child to have that kind of disposable income? It’s up to you, but it’s a recipe for disaster, because if other kids know there’s that much money around, they’re going to hit them up.
Another phenomenon with wealthy kids is rich kids paying other kids to do their laundry . . . I’m not talking about an entrepreneurial kid who sets it up as a business. I’m talking about, ‘Here’s $20, go do my laundry.’ It’s demeaning to the poorer kids, and it’s terrible for the wealthy kids because they’re not even learning the life skills they’ll need.
I make my kids pay for part of their tuition. They can pay with loans, or real money, or taking AP courses in high school, or grants, or scholarships. But that’s the deal. They pay a quarter. One year’s worth. But they screw up, too. My son studied a semester in London, and he lost his wallet for the eighteenth time, and I said, ‘Nope, that’s it. Go figure it out.’ Well, he didn’t starve . . .
Q:What about children of divorced parents, who may be getting different messages about money from both parents?
A: It’s hard, because we have different kinds of family now, and there are so many divorced parents. One parent may be vying for position with the kid, and they’re not always economically equal. I say, ‘My house, my rules.’ Point out to the kids, ‘I can’t afford what your father is doing.’ But if you’re undercut, there’s nothing you can do about it.
Q:How would you characterize this generation of students in terms of the financial challenges they face?
A: It’s the Internet generation. They’re more status conscious in terms of clothing, and these things are accessible. You don’t have to leave your dorm room. You can shop online.
And it’s very much the entitlement generation. You don’t have the parents saying no. There’s something called the nag factor. Kids nag for something and parents give it to them. [Earlier generations] knew not to nag. No meant no. You might go back again and maybe hit dad up if mom said no, but you didn’t nag. Especially with [baby boom parents], we’re so busy, we have so little time, it seems easier to hand them $20 than deal with them nagging.
Q:What is the most important concept to teach young people about money?
A: Natural consequences. The way you get it is you earn it. There’s no entitlement program.
And have those conversations. Parents need to sit down with the kids and level with them, and say, ‘Here are the economics. I’m not scaring you; I’m not guilting you; but here are the economics.’
Money has always been the biggest secret, which is ridiculous. First of all, you’re placing more of a value on it than needs to be placed. They don’t know how to tip, because we take the check and hide it. What are we hiding? The prices were on the menu . . .
We grew up in a Protestant culture. ‘It’s easier for a camel to get through the eye of a needle,’ and all that. Money is somehow this bad, taboo thing. It isn’t. Money is about choice. The same dollar can go to drugs, or can go to charity. Money itself isn’t good or bad. It’s neutral.
We make money more important than it needs to be. We keep kids out of it, and then we get mad at them when they screw up. Money is the last taboo, and we’re hanging onto it hard. It’s the last frontier.
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Neale Godfrey, SIS ’72, was with her children at a New York City toy store when her little boy fell in love with a miniature sports car, just the right size for him to drive.
“It cost a little more than a house,” she says. “I remember on the escalator yelling at him, ‘Don’t you know I can’t afford it?’”
But the boy had a solution. “Don’t use money,” he said. “Use that magic piece of plastic.”
The bank executive was shocked. So she marched her children into a bookstore, intent on finding a book on how to teach them about money. But there was nothing. “Well, mom,” her daughter said as they hunted fruitlessly, “why don’t you write the book?”
Godfrey would end up writing 14 books on children, life skills, and money, including the New York Times bestseller Money Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Children, released in a new edition this summer, and Money Still Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Teenagers and Young Adults (2004).
It’s not a future she would have envisioned at AU. Not even when her head was spinning from the tear gas canister that, in a way, gave Godfrey her first national break.
Imagining a future as a diplomat, the School of International Service student sold Avon cosmetics, delivered the Washington Post to dorms, and donned a pink striped uniform to work as a cafeteria “garbage girl.”
But the late-1960s campus was a tumultuous place, and one day during a protest, Godfrey relates, she was walking to work in her pink stripes when “I was hit on the head with a tear gas canister. When I came to, there was a camera crew from a local TV station, and they had a camera in my face and were saying, ‘What subversive group are you part of?’
“I was 18; it was 1969, and ‘garbage girl’ was not going to come to my lips. They were saying, ‘Are you Viet Cong? Pinko? Leftist?’ I said, ‘Yeah, that’s exactly it. That’s the group.’ Then I picked myself up and went to the cafeteria.”
The news clip was seen not only by Godfrey’s mother, but by a relative with the State Department in Vietnam. “Politically, he was a little to the right of Attila the Hun, and he was aghast,” she says. He flew back for a family meeting, in which the sarcastic undergrad needled him until he finally burst out that she’d never understand Vietnam unless she saw it for herself. When that, too, prompted an eye-rolling retort, he got her an airplane ticket and a visa.
Godfrey went to Vietnam over winter break and came back with a story she sold to Seventeen magazine, “My Trip to Vietnam,” which led to a series of speeches on campuses and paid for a full semester. It turned out she had better instincts as an entrepreneur than a diplomat.
It took another accidental break, though, to bring her into the corporate world. Fresh out of AU and married to a struggling law student, she was looking for a way to pay the bills. She proved a disaster as a typist, but two semesters abroad in Mexico had taught her a little Spanish, and Chase Manhattan Bank, she learned, was hiring in its international department.
It turned out to do more than pay the bills. Godfrey ended up rising to vice president, and was president of First Women’s Bank when her son’s cheery comment about the “magic piece of plastic” got her thinking. Once again, the accident of a single moment opened up a whole new career.
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