Photo: A hand holding money and a smartphone

Financially capable

Peers, parents, and communities are learning how to support good financial decision-making in the transition to adulthood

Joyce Serido had a hunch. Financial well-being is her focus as a family social scientist. Working with young people and families, she observed that how people use money matters more than financial knowledge.

Joyce Serido
Joyce Serido

It was 2007, and her colleague got a grant from the National Endowment for Financial Education (NEFE) to study whether financial knowledge matters. She was in Arizona when the study launched with 2,000 undergraduates.

Serido didn’t know that she was embarking on a 10-year journey. She just wanted to learn more about how teens become financially capable adults.

“The foundation was shocked by how little financial knowledge mattered!” Serido says.

Intrigued, NEFE funded data collection with the same cohort in 2009, 2010, 2013, and 2016 for what became the Arizona Pathways to Life Success for University Students (APLUS), the first scientific study of young adults’ finances. It’s important because many life events—such as education, marriage, and career formation—take place by age 30, and most have financial implications.

Arriving at the University of Minnesota in 2014, Serido has stayed in touch with 850 of those young adults. They are in their late 20s now, dispersed across the country and indeed the world, and Serido has come to know them well.

Sometimes when she describes their life choices to others, the response isn’t very respectful.

“People will say, ‘They’re just whiners,’” she reports. “But think about it: They were teenagers when 9/11 happened, and they left home just before the 2008 financial crisis—life-changing experiences.”

“In the course of my work, I’ve heard young people tell others, ‘Our parents grew up in a different world than this.’ I think, ‘They’re right.’”

Serido exudes compassion and positive energy. She’s the research powerhouse who led a panel on financial literacy at the Minneapolis Federal Reserve in January, and she is also a friend and mentor to students and community members around the state.

Here are some tips and ideas from Serido, her students, and colleagues for helping the young people in your life.

Financial parenting: should vs. show

“My research looks at two kinds of financial parenting,” Serido says. The first kind is telling young people the “financial shoulds”—for example, “You should save your money.” The other kind is showing them how—and explaining why.

Those whose parents showed them how and why are grateful.

As family resiliency educator with University of Minnesota Extension, Antonio Alba-Meraz says, “Cultivate communication!” Alba-Meraz works with many immigrant families around the state and has devised effective ways to get parents and children to talk together about financial decisions, including college.

Be proactive: don’t try to teach in the heat of the moment, he says. Focus on something relevant, something the person wants or values. And set clear expectations.

Student loans, in moderation

The crisis narrative about student debt has become so pervasive that many students and their families now assume that going to college will result in crippling debt. That narrative can create a blind spot toward other options, including grants, scholarships, and work-study—or deter high school students from even applying to college.

“Once you have loans, you’re stuck. So how do you avoid over-borrowing?” Serido says. “We encourage parents to talk to their kids about money and steer them toward good information.”

From Mankato to Grand Rapids, Serido and her colleagues conduct workshops to help students and families understand financing options before making commitments.

“We talk about comparing costs and some web-based tools that help students to compare,” says Extension educator Lori Hendrickson from Grand Rapids. “We remind participants to look at the ‘free’ money [grants] first, then savings and work, before you go to loans, and then the loan terms. There’s a hierarchy of what you might look at.”

Community and identity

It’s not just families that have a stake. Communities do, too.

“Through this project we are engaging the community in a conversation about financing education,” Serido explains. “We want to build financial capacity, not just for individuals and families but for their towns and communities. It’s a different focus than making money.“

Hendrickson sees two important things that communities and caring adults can do.

“Elders in the community saying, ‘Save. Right now. Toward education,” says Hendrickson. “Another is talking about goals with children very early on. Creating a saver identity and also an education identity among children and families.”

Respect the young

“Young people are not nearly as intimidated about money when talking with peers,” says Serido. “They are more likely to listen. They’re not so much inspired as just not turned off.

That’s why she and her colleagues started a University student group called PEER$. The students meet on Mondays, discuss how to talk about financial topics, and then meet with high school students, other undergrads, and even parents.

Photo: PEERS members Eva Peterson, Eman Galab, Samantha Zamok, Karlie Loewen, Nina Thao, and Maria Schimek pose in McNeal Hall.
PEER$ members posed in McNeal Hall. Clockwise from left: Eva Peterson, Eman Galab, Samantha Zamok, Karlie Loewen, Nina Thao, and Maria Schimek.

At one meeting, for example, they talked about how to explain credit scores, credit cards, and credit in general to students. They shared their experiences and the consequences of closing accounts or not having a credit score at all.

“I just say a credit score is like a GPA and then they get it,” one PEER$ mentor shared. “Everybody knows how a bad grade can affect your GPA.” Others nodded.

Patrick Taylor, a supply-chain operations major from the Carlson School of Management, enjoys interacting with students through events like the Reality Store workshop.

“PEER$ is a fantastic opportunity to share what I have learned about finances in college,” says Taylor. “Many of the students we work with are first in their families to go to college, so it’s helpful for them to get an inside look.”

Parents got to hear from PEER$ recently while their high school students learned about careers in agriculture on the St. Paul campus. Breaking into small groups, the parents talked about paying for college, completing financial aid forms, and comparing award letters by looking at samples. Samantha Zomok, a family social science major in PEER$, chimed in about the Free Application for Federal Student Aid.

“When I first filled out my FAFSA, I missed checking the box to be considered for work-study,” said Zomok. “Not checking that box was about a $5,000 mistake—loans I wouldn’t have had to take out. Always check the box to receive work-study and accept it, if awarded. You can decline it later, but you cannot get it back. And if you decline work-study, you will get more of your award in loans.”

Observing the parents’ response at Zomok’s table, Serido predicted they won’t forget to look for that box on their own children’s FAFSAs.

From financial literacy to financial capability

It’s not surprising that parents play a huge role in influencing children’s financial capability because that influence begins so early. That’s why Serido is a big proponent of financial education early and often.

“When students learn about money in kindergarten they only take in so much, but when they hear the concepts again in fourth grade, they hear them at a different level, and by the time they’re in high school, they have a foundation for understanding why these concepts matter,” she said at the Minneapolis Federal Reserve in January. Teachers, after-school program representatives, and business and community organization leaders came for a local and then a national conversation via satellite about economics, education, and the country’s future.

But knowledge is not behavior. You may know what you should do, but feeling confident in moving forward and making the decision that is best for you—that is capability.

Serido engaged a panel of educators from four different K–12 schools to talk about what’s working and not working to turn financial education into financial capabilities. They described parents as guests in classrooms, mentor programs with the chamber of commerce and local businesses, and even opening a real credit union run by students in an urban high school’s store. Serido and one of the teachers talked about peer-to-peer connections.

“Peers are teaching young people how to make good choices,” said Serido.

Money can be fun!

“What I love about what I do is I make money fun,” Serido says.

“It’s not about making enough money—there’s never enough money. It’s about using your money well. Is it allowing you to sleep? Or keeping you up at night? The focus shifts off of money to life choices.”

“Every day we make financial choices, from what to eat for supper to whether to go to college. There are pros and cons, consequences and benefits, to each choice,” she says. “Most of all, I want people to learn about opportunity costs!”

She recommends that young adults look at their options, make choices in line with their values, and then—learn from it. Financial capability is a lifelong process, and each stage of life has a readiness-to-learn aspect where we can ask ourselves where money is relevant in our lives.

“I hope with this sea change of conversation we can help young people make the transition,” she says, “so it’s not about somebody making choices for me but about me knowing what to ask for . . . so I make a good choice.”

Learn more about Joyce Serido’s work on financial stress and resources for families from the University of Minnesota Extension. A complete list of faculty in the Family and Financial Decisions department of Family Social Science can be found here.

Story by Gayla Marty | Photos by Sarah Burcher and Gayla Marty | Spring/Summer 2017