What? I Have to Pay Taxes?

November/December 2000

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For years she listened to stories, told by friends in the bursar's office, about Stanford students who didn't know how to write checks. And she sat at her own desk and heard 18-year-olds say, "I don't have to pay taxes because I'm a student, right?"

Finally, Mary Morrison, senior associate director for financial aid, had heard enough. She put together the kind of money-management course she wished her own son could have taken and found a faculty sponsor in Ross Shachter, resident fellow at Serra and associate professor of engineering-economic systems and operations research.

With no more marketing than an e-mail notice posted to the Stern Hall dorm cluster last winter, the one-unit course, "Financial Literacy," attracted 125 students the first night. Morrison, who had planned on small-group discussion, moved the class from the dorm lounge to Cubberley Auditorium and reworked her notes for a lecture format. The first session--on withholding taxes--appeared to go smoothly, until a student approached her after class. Recalls Morrison: "I thought I'd been brilliant, but he said, kind of quietly, 'I don't think I understand. They take your money and they don't give it back?'

"And I said, 'Yeah, you understand exactly.'"

More than 220 students, from freshmen to doctoral candidates, took Morrison's course last year, and she's now gearing up for another session in winter quarter. The object is to teach otherwise savvy Stanford students how to set up a budget, paycheck by paycheck, for living on $36,000 a year.

In her lectures, Morrison showcases the unglamorous. Utilities. Renters insurance. Security deposits. 1040 forms. Stocks and bonds. Credit card debt.

If it sounds remedial, Morrison says that's because many students have zero experience in money matters. In estimating monthly expenses, she says, "students don't include buying coffee on the way to work. They don't figure in the cost of extension cords for the new apartment."

To underscore the importance of financial planning, Morrison asks them: "Are you going to win the lottery? Or maybe you're planning to inherit from your grandmother? But what if she gets hold of a boy toy [and spends your inheritance on him]?"

That prospect elicits nervous laughter and brings out the calculators.

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