When money isn’t real

For many students who take out loans to finance their education, cost numbers are just that—numbers on a page. That is, until they have to actually start paying them back. Then it becomes uncomfortably real. This was the subject of Adam Carroll’s lecture, “When Borrowed Money isn’t Real: The $10,000 Experiment,” a Portland State of Mind event sponsored by the Financial Wellness Center.

“His message on financial abstraction is relevant, not just to Portland State University or Oregon, but to our country as a whole,” said Shawna Chambers, manager of the Financial Wellness Center.

Carroll is the founder of National Financial Educators and the author of several books about financial planning. His talk focused on the idea that when we spend money we don’t have on hand, like taking out loans or swiping our credit card, it’s not real to us. Therefore, we are likely to spend more and make decisions we wouldn’t if it was actual cash in our wallet.

“It’s a concept known as financial abstraction,” Carroll said. “It’s an idea that when we become separated from money in its current state, then it changes the way we spend money.”

To illustrate this, he described an experiment he conducted at home with his three children who regularly play Monopoly. They tend to be generous with one another, frequently bailing each other out of jail or loaning one another money, even though the object of the game is to bankrupt your opponents. One day he swapped the paper money for real money, and observed how this affected the children’s behavior.

His daughter’s strategy didn’t change, but his two sons’ did. When they played with real cash, they tended to be more cautious and conservative.

Carroll shared many of the strategies he uses to teach his children about managing finances, including giving them opportunities to make their own decisions. Instead of buying them snacks when they’re out, for example, he gives them an allowance to use as they like. But when it’s gone, that’s it. He doesn’t give them any more.

On the other hand, some parents grant their children’s requests for money without restriction. One parent he worked with admitted to depositing money in his daughters’ bank accounts whenever they asked because he didn’t want them to struggle. According to Carroll, this enforces the concept of money as an abstraction and deprives children of an important opportunity for personal growth.

“The struggle is what shapes us,” Carroll said. “I get that it’s a struggle. But I also think that if you’re open to what that struggle can teach you and what it can make you, that’s a way different scenario.”

This example resonated with Chambers. “As a parent myself, I see my child being influenced by the concept of not having cash in hand,” Chambers said.

Carroll offered the audience five specific strategies for better financial fitness: talk about money candidly, read books about money, develop a budget and hold yourself accountable to it, have a financial mentor and develop a family financial tree.

But for Carroll, the problem of financial abstraction isn’t just a personal issue, it’s a national one too.

“Our job moving forward is to help younger generations make really smart decisions with their finances,” Carroll said. “Our national debt is ballooning out of control and we are precariously placing that on the next generation’s shoulders.”

He believes it’s our responsibility to reduce this burden.

For many college students, the burden of student loans is already very real. Many have borrowed money without understanding the ramifications, like the amount of their monthly payments or how many years it will take to pay off the full bill.

“The cost of education is getting higher, people are needing to borrow money, and the jobs are not supporting the repayment plans,” Chambers said. “For most graduates, just being aware of the job market and starting salaries, not average salaries, and the cost of living—those are the conversations that aren’t happening until they’re in their six-month grace period.”

This is why Student Financial Services at Portland State created the Financial Wellness Center. They want students to understand their debt and give them the resources to make better decisions, now and in the future.

“We look at the Financial Wellness Center as a place to come have a conversation and ask questions, share tools and experiences, and learn from each other,” said Amanda Nguyen, director of Student Financial Services. “It’s not just about your account at this school but access to life skills.”

The Financial Wellness Center is located in Neuberger Hall room 179.