The resignation of the president of the University of Missouri, Tim Wolfe, and the ouster of R. Bowen Loftin as chancellor due to student activism including the Missouri Tigers football team’s refusal to play until the president was ousted, is stirring emotions and protests about race on campuses across the country.
Students are speaking up at colleges including Smith College in Northampton, Massachusetts, to Yale University in New Haven, Connecticut, about incidents and treatment that makes campus life a daily struggle.
[Related: The 10 Reasons You Aren’t Rich and 10 Ways to Change That]
Many of these students experience racial isolation in predominantly white institutions, which is an often overlooked aspect of race discrimination. Psychologists and financial experts have observed, however, that if left unchecked, the coping strategies students create to deal with this scenario can actually play out in the form of unconscious financial behavior in their adult life, which comes at a high cost.
Andre Robert Lee
When director Andre Robert Lee was 14 years old, he received a full scholarship to attend one of the most elite prep schools in the country. His mother, who struggled to support Lee and his sister on a factory worker’s salary, thought the scholarship was her son’s ticket out of the ghettos of Philadelphia and into a world that would lead to career and financial success.
While Lee thrived academically and went on to critical acclaim in the film world, his journey, which he chronicles in the award-winning documentary The Prep School Negro, shows how growing up as ‘the only’ in a world of racial isolation can come at a price.
“On the surface it looks like I’m doing very well. People see that I travel and that I have an exciting life, but I had no savings. I’ve struggled to pay my bills and get by,†says Lee.
“One would think that growing up in privileged environments leads to success,†says Wendy Van Amson, co-founder of the Independent School Diversity Network. “But you also have to think about what’s really happening to your child. You have to find out what they’re thinking and pay attention to whether they’re being demoralized.â€
Financial experts now see that demoralization can result in coping strategies that can negatively impact adult financial behavior. As social psychologist Leon Festinger pointed out in his 1954 Social Comparison Theory, which shed light on the ways in which confidence and self-esteem develop, humans have an instinctual drive to judge themselves and value their own abilities based on what they see in the people around them.
While behavioral finance is difficult to quantify, and this is a new area of expertise, experts say the ways in which financial issues around race can affect your bottom line is real.
Filling the Gap
“Feeling the kind of isolation Andre felt means that you want to watch out for ‘co-dependency’ kind of responses to money. Similar to alcohol, overeating, cigarettes, etc., addictive behaviors would be the greatest sign that help is needed,†says George Kinder, a financial planner and tax adviser, who is considered the father of the behavioral finance movement that started in the 1980s.
Kinder, also founder of the Kinder Institute of Life Planning and author of The Seven Stages of Money Maturity (Dell, $16.00), says growing up in this kind of ‘image gap,’ where you don’t fit in racially, culturally, or sometimes financially, as was the case with Lee, can create conditioned
behavior patterns that if left unchecked could last a lifetime.“These patterns might include either using money as a ‘treat,’ like sweets, sex, or alcohol, in ways that diminish your ability to fulfill your saving and investment strategies for your personal freedom, or the reverse. They can trigger a miser-like approach to money, as something that gives you safety and security, but as a consequence you sacrifice relationships and other personal goals that have far greater meaning but are harder to define,†he adds.
Experts say a common occurrence in parents of color whose children are in these situations is that they tend to overspend in order to give their kids the same experiences as their peers, without realizing that they are laying the groundwork for financial problems down the road.
“I know some parents who were able to send their daughter to a study abroad program. They are financially well-off, but many of the kids are wealthier and able to afford pretty luxurious experiences,†says Jacquette Timmons, financial behavior expert and CEO of Sterling Investment Management Inc. “The daughter called to tell her dad that he didn’t put enough money into her account, without even considering that what he gave her was supposed to last the full semester. It’s very difficult for parents in this situation to say no. In addition, the child grows up with no sense of financial boundaries and poor role modeling. It stretches everyone financially, psychologically, and emotionally.â€
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Knowing Your Value
For Lee, however, the problem wasn’t overspending. Aside from a brief stint with credit card debt early in college, he is not prone to debt. His issue came in the ways in which he valued himself and his work.
“When the film came out and I was touring, lecturing, and doing screenings, I began to notice that I would willingly accept lower fees than white filmmakers, even though I had more talent and experience. This created big problems for me financially at a time when I should have been cashing in on my work,†says Lee.
Lee said his friend and mentor Miko Branch, co-creator of Miss Jessie’s haircare products, pointed out his pattern and provided him with the support he needed to turn his behavior around.
“She really helped me understand that there is nothing wrong with me. I come from a situation in which my family did not have an opportunity to build wealth, and I needed to pay attention to how that was playing out: I had deep-seated feelings of unworthiness, and a belief that money should be a struggle. It’s amazing how when you open your eyes, you see this so clearly in your financial patterns,†says Lee.
“I now have set fees and I don’t waiver. My finances are reflecting that. I’m building savings and financial security. I would have never believed I could turn my life around this way without her ongoing mentoring and support,†he adds.
“Having a person, or a support group you can trust around these conversations can help provide grounding and cut through the isolation,†says Kinder.
More Than a Wealth Gap
While many blacks, particularly those who grew up with solid financial resources, downplay the realities of racial isolation, experts say if you don’t think it’s had an impact, you’re kidding yourself. It’s simply not possible to grow up a different color than almost everyone in the room and not have it
If you think the remnants of growing up in racial isolation may be affecting you or your loved ones:
Get clear on your goals and your budget: “Keeping your eyes on the prize of your personal aspirations can keep you from these behaviors,†says Kinder. Experts also say that a telltale sign is to look at the financial habits of people in your racial and income group who do not battle this issue of isolation. “If you’re spending on schools, vacations, and restaurants in an attempt to keep up with people who have more income and assets than you, you may have a problem,†says Timmons.
Be honest with yourself: “You have to see if you’ve turned the experience into a positive in your emotional and financial life, or if it’s a hindrance. Psychologically we all remain the class we were raised within. There is a tendency to use money to acquire so-called ‘markers of success and value’ to try and offset the effects of pervasive devaluation,†says Laszloffy.
Don’t be afraid to get counseling: If you suspect racial dynamics are playing out in your financial life, get professional help. You can contact the Financial Therapy Association for a list of financial therapists in your area. Be sure to mention that you are looking for someone with expertise on race in financial matters.