The teens I know are hungry for guidance and insight on becoming money-smart. We know that money is often at the heart of family stress, even if we don't know why. But whether because our parents want to shield us, or because they don't know how to talk about it, money winds up being a taboo topic.
I am 17 years old; my friends and I are deep in the process of preparing for college. Even though our parents aren’t saying much to us about money, we know the stakes are so very high. We don’t want to make a mess of our financial lives –and our parents’ finances – by overspending on college. And we know that pretty soon we are going to be in charge of spending and saving decisions. But no one is stepping up and having honest conversations with us.
I asked my Aunt Suze to help me sort through three of the big issues families need to start talking about.
1. The College Cost Disconnect
As part of an exercise for college-bound juniors at my high school, we had to rank-order what we valued most when choosing a college: weather, proximity to home, Greek life, religious affiliation, school spirit, cost. As we shared our, lists I was shocked that almost no one put cost in their top five.
Then, we were asked to rank the same factors by what we thought our parents found most important. Almost every student listed the cost of the college either first or second.
Clearly, there's been a communication breakdown.
Prepping for college is a family affair. Students have been working on good grades and many parents have been working on saving to help pay for college. But with college approaching we need to figure out how to work together as a family to land on a college plan that will be affordable. But parents just don’t want to go there. One student I interviewed said her mom was reluctant to let her look at certain schools, but didn’t really say why. It was only much later that her mom explained that those schools were too expensive. Another student said that his parents didn’t dissuade him from considering any college, even though he knew that certain schools would be tough for his family to afford.
A more frank conversation would help students focus their efforts—and give parents a framework for talking about who'll pay, and how much the family can contribute.
What Sophia has written could not be more true. No one talks about money. It’s insane how the people who love you most drop the ball when it comes to financial honesty.
I realize that’s not your fault. But I need you to realize that you must be the adult and ask your parents to start talking money with you. Because what they don’t tell you today can make a mess of your future.
I want you to hear me clearly: how you and your parents pay for your college years is going to have a huge impact on your life. It may sound crazy, but 10, 15, 20 years from now, the last thing you want to learn is that your parents aren’t ready to retire. Because they raided their retirement savings to pay for your education. Or they took out too much in student loans. And that my young friends, becomes your headache. You will want to do everything you can to help your parents, but that’s not going to be easy, given that when you are in your 30s you are going to have plenty of your own financial goals to work toward.
As college approaches, work as a family to find the best colleges that will be financially affordable. Maybe that’s your dream private school, if it comes through with a boatload of aid. Or maybe it is a terrific in-state public school that will give you a great education without saddling you and your parents with crushing amounts of debt.
Don’t tell me that’s settling. That’s being incredibly smart about your future and your parents’ future. And what I know for sure is that a school never makes you. You make your school.
Now that said, I am fine with you borrowing to attend to school. Notice, I said you. Not your parents. Unless they are 100 percent confident (and honest) that they are on track with their retirement and paying down their debts, they are never to borrow to send you to school. Here’s what you and your parents need to focus on: There are loans for college. There are not any loans for retirement.
Every student is eligible for Stafford loans that are offered by the federal government. (There are also Perkins Loans and Pell Grants for students who qualify for financial aid.) Your parents will need to work with you to complete the FAFSA form to be eligible for Stafford loans.
There are annual loan limits for Staffords. That’s good! It will help you graduate with a manageable amount of debt. My definition of a manageable amount of debt: You can pay it off in 10 years. An important rule of thumb is that you don’t want to borrow more than you expect to make in the first year after school.
If your parents insist on borrowing, please make them promise they will only borrow an amount they are confident they can get paid off within 10 years, or before they retire; whichever they expect to happen sooner.
2. When Giving Isn’t Really Helpful
Summer jobs are often kids’ first step into the workforce, and their first experience with earning their own money.
After interviewing many teens with jobs that ranged from golf caddying to clerking, I noticed that how working teens value money depends on whether they’re also getting spending money from their parents.
The students who get both a paycheck and money from their parents say they work because they want to feel independent, get work experience and like making their own money. But they also don’t feel pressure to hang on to their money. They know their parent is a safety net; if they can’t cover a purchase from their paycheck, Mom or Dad will likely help.
Students who don’t get any money from their parents have a different relationship with money. They look at every potential purchase and calculate how many hours of work it will take to have the money to buy the item.
One girl told me that when she’s about to make a purchase, she thinks, “Is this coffee really worth 30 minutes of cleaning out the pool? Is this shirt truly equivalent to three hours of work?” A $5 bill from a parent’s wallet feels effortless; getting paid six $5 bills after sitting for two rambunctious sisters and their new untrained dog—then making dinner and cleaning up the house—feels hard-earned, and something to be protected.
All of this made me think that maybe our parents are doing us a disservice when they just give us money with no strings attached. What should be the balance between money earned and money given?
It is absolutely a disservice for parents to hand money to their children without any expectations. I have long insisted that if you are giving money to a child it must be earned. For a five-year-old that might amount to getting the toys back in the toy box every night before bed. For the 15-year-old that might be taking on certain household chores.
Instilling the power of earning money is one of the greatest lessons –and gifts –a parent can give a child. It is not punishment. It is liberating. Children who learn the value of earning money from a young age are going to be so far ahead of the curve when they are out of school and on their own. And as Sophia points out, earning your own money, providing for yourself, instills such a sense of pride and capability.
If you really love your kids have them earn every penny. Establish a work ethic in them at a young age and the end result will not just be a kid who respects money but it will be a kid who respects who they are and what they do. That is priceless.
3. Peer Pressure? That’s Nothing Compared to Parental Pressure
Whenever I hear a teacher caution us not to compare grades, I just roll my eyes. In my circle of friends, the grade conversation is inevitable. The sad reality is that teens are very competitive, about grades, SATs, pretty much anything that can be ranked or sorted.
The pressure to perform gets even worse once the college crunch gets real. And I’ve noticed that parents are making it even worse. It’s not just the pressure many teens feel from their parents to excel. Plenty of teens have told me that they feel as if their parents’ self-esteem is a function of their child’s academic success.
I once overheard two women at a dinner party discussing their daughters’ standardized testing. One mother, whose daughter’s score was close to perfect, sat up straighter as she revealed – with what sure seemed like mock humility –her daughter’s score. “We are happy to be done with testing,” she added—as if she'd been the one sitting for the exam.
I know our parents love us. And deep down only want what is best for us. But the pressure they put on us doesn’t seem very healthy, for either of us.
Let me tell you, it doesn’t stop once you get into college. When my own mom turned 90 she moved to Florida to be close to me. She lived in an independent living facility close to my home. When I went to visit her, it was as a daughter looking forward to spending time with her mom, and loving up her mom.
My mom had a different idea. Every time I arrived she would take me upstairs to where all her friends where hanging out, and would practically put me on display. Not as her daughter, but as Suze Orman, the personal finance expert. It made her so happy to show everyone that Suze Orman was her daughter. But from my perspective, I sort of lost my mom to my own fame. This went on for seven years, until she passed.
So, I hear you on the parental pride/self-esteem issue. It is real. And it endures. I think you should absolutely try and talk to your parents about it. Not an argument, but a conversation, where you work hard to listen to where the other side is coming from. It is when we focus on listening that we open up our ability to truly communicate.
I didn’t have that opportunity to talk this out with my Mom. It’s hard to ask a 90-year- old to listen and adjust. I just let her be. If your situation is like mine and you cannot change your parents’ behavior, you just need to dig a bit deeper into your own self-esteem reservoir.
Your life is your life. All you owe your parents is living a happy life. The quality of that life is going to come from the effort you put into moving toward the goals and dreams you have for yourself. Don’t let others define you. Don’t get wrapped up in what others think about you. Be your strong self and your kind self. Lead with those two attributes and you will be on the path to a happy life. What parent can’t love that?