ethics-and-money-2

It’s Tempting, but Is It Ethical?

Greek philosopher Socrates is credited with having said, “The more men value money-making, the less they value virtue.” Combine that old-world sentiment with today’s bling-encrusted “Keeping Up with the Kardashians” craze, and it’s difficult to feel hopeful for the future of moral financial behavior. Throw in a Saturday night with HBO’s The Wizard of Lies about the life and fall of Bernie Madoff, who orchestrated the largest financial fraud in history, and you realize that the younger generation is bombarded with questionable messages about money and ethics.

Reports of unethical financial behavior dominating the headlines may have you wondering how to navigate the pathway to building wealth and taking ethical steps to get there. How do you know if you’re making the right choices when it comes to managing money, especially if you see others modeling poor financial behavior? Possibly if Madoff had considered some of these issues while he was a student and swimmer at Far Rockaway High School in New York, his financial story would have turned out differently.

In an article she wrote a few years back in Forbes magazine, personal finance author Neale Godfrey said, “The underpinning of any financial interaction should to be based upon ethical behavior and mutual respect.” She then recalled a scenario in which a college student had run up a huge credit card bill and then insisted that it wasn’t his fault because the credit card company had given him the card. When she asked the audience to weigh in, a teen responded, “If you racked up debt when you knew you couldn’t pay for it… it’s stealing. It’s not any different if I came into the store and stole stuff.”

Godfrey was impressed by that answer. In fact, the minute that college student knew he was living well beyond what he could afford to pay back, he had a moral obligation to stop charging. In the end, we need to be responsible for our own financial decisions, and not leave it up to a bank or large institution to determine our financial fate.

Learning to manage money responsibly and ethically isn’t always easy. Building basic budgeting and savings skills and discussing financial values with parents and educators will help you deal with ethical dilemmas. Until then, here are a few more scenarios to get you thinking about the power of money, ethical choices, and sound financial decision-making. What would you do?

Neither a Borrower Nor a Lender Be

Notoriously poor earners, high school students often find themselves strapped for cash. Have you recently turned to relatives and friends to borrow money? Before asking for a loan, it’s important to determine why you think you need it, or whether you can get the money another way. You may think you will pay it back right away, but what if that doesn’t happen?

“Borrowing or loaning money can put considerable strain on relationships. Before borrowing money, ask yourself if you absolutely need it,” says Jennifer McDermott, the consumer advocate for finder.com. “Spending outside of your means is a dangerous and tough habit to break, so the more you can practice good money habits now, the better off you are down the track.”

Teens also shouldn’t feel pressured to loan money to a friend. “If you are often on the loaning side, have an open and honest conversation with your friend and let them know it puts you in a difficult position,” McDermott says. “A true friend will understand. Keeping money out of friendships is one of the key ways you will ensure they remain strong.”

What’s in Your Wallet?

Who hasn’t dreamed of discovering that bulging bag of money in the corner of the attic, a relic of some past homeowner? It’s not uncommon to find coins or even dollar bills on the ground, and you can probably keep small amounts of cash without feeling guilty. But if you found a wallet full of money, would you just pocket the cash and never look back?

“Stumbling across any sum of money can make you feel like lady luck is on your side! However, despite the ethical questions of pocketing money misplaced by someone, there may also be legal ramifications of not returning the cash,” says McDermott. “Every state has laws requiring the return of money to the rightful owner if it is possible to identify them. So, money found in a dropped wallet or an addressed envelope should be easy enough to return to their rightful (and likely very grateful) owner. As for money that is found ‘floating,’ most states still require you to turn it into local police to give the owner the opportunity to claim it.”

And beyond the legalities, was that wad of cash really ever yours to keep?

Money Under the Table

Some employers try to get away with paying workers without reporting payments to the government. They usually engage in this practice because they don’t want to keep records of the payments or owe payroll taxes. Some teens may be lured into agreeing to such an arrangement because they get to keep more of their paychecks.

“Many teens don’t realize that the decisions they make as teens can hinder the outcome of their future,” says Lacey Manning of LTG Financial in Ocala, Fla. “Making money under the table for an employer for an extenuating period of time can negatively impact your Social Security and Medicare benefit quarters. Not paying into the system is not only unethical, but can be a poor financial decision.”

When working out the terms of employment, teens should make sure they fill out the Internal Revenue Service (IRS) Form W-4, which allows employers to withhold the correct federal income tax from their pay.

“One of the things that students are eventually going to have to deal with is filing their taxes,” says Jayson Mullin, the owner and founder of Top Tax Defenders in Houston. “When it’s time to no longer be claimed as a dependent, they’ll face the complicated tax code and the onus of filing with the IRS yearly. While it can be tempting to fudge taxes (or even not pay them), getting audited by the IRS is not something anyone wants to experience.”

$4.2 Trillion Down the Drain

Choosing to sell pirated works or counterfeit goods is unethical and illegal; it also could result in fines or imprisonment.

Counterfeit goods such as handbags, jewelry or clothing are imitations that are sold under a brand’s name without permission. Counterfeiting is different from selling knockoffs, which just look like products made by popular brands.

Piracy involves illegally reproducing and/or sharing original content such as downloaded music and movies, which violates copyright laws. Even filming your favorite band at a live concert without permission can be illegal.

Despite the potential penalties, counterfeiting and piracy are big business. Counterfeiting and piracy are projected to drain $4.2 trillion from the global economy and put 5.4 million legitimate jobs at risk by 2022, according to the International Chamber of Commerce.

“Teens are easily influenced, and this leads to poor decision making, which could include illegal money-earning activities. But they don’t always realize that the consequences can cause greater problems in the future, especially regarding career opportunities,” says Manning.

Purchasing fake and pirated items infringes on the owners’ intellectual property rights and can contribute to workers losing jobs. You’re also helping criminal enterprises succeed. So the next time you’re tempted to send a copy of a song you bought online to a friend, burn copies of a DVD to give as gifts, or purchase fake designer goods from street vendors, you may want to consider the true cost of your decision.

“When you have limited access to funds, whether part-time work or an allowance, cheaper always seems better. However, often a lot of cheap goods come at a larger ethical price,” warns McDermott. “By purchasing items without understanding their origin, you could be supporting industries that promote underpaid labor, terrible working conditions and questionable supply chains. In order to shop ethically, you need to become educated in where the things you buy come from.”

Money wields power for both good and evil. Adjusting your lens as you think about decisions involving money can help you navigate this sometimes slippery slope. When making ethical decisions related to money and other areas, Charles Read, CEO of GetPayroll, a financial services business in Texas, offers the following advice: “Truly ethical behavior can be expressed as Rotary International does in a test. (1) Is it the truth? (2) Is it fair to all concerned? (3) Will it build good and better relationships? (4) Will it be beneficial to all concerned? If students ask themselves these four questions each time they are about to make a financial decision, they will make an ethical decision.”

Conversation Starters

Have you ever been confronted with any of the financial dilemmas featured in this article? Possibly others that are not cited? Share your story in the Comments section of this article or in the Facebook article thread at https://www.facebook.com/whartonhs.

Adults often think that TV shows like "Real Housewives" and "Keeping Up with the Kardashians" negatively impact young people's financial expectations and ethics. Do you agree or disagree with this? Do you feel entitled to a life of wealth? Why or why not?

What do you feel has the greatest influence on your financial values? What shapes your decision-making when it comes to money?

5 thoughts on “It’s Tempting, but Is It Ethical?

  1. My financial values have always been firmly in place from what I learned from my parents and other family members. Being careful with money was always emphasized because money is easy to spend and when the economy crashed in 2008 my family really had to budget their money. When I want something I typically ask if I really need it and if I can afford to buy it twice. Being realistic with my use of the item is key because if I’ll get my money’s worth it’s worth it but if it’s not then I would not buy it. The test of being able to buy whatever it is twice gives me insight on whether it truly fits my budget or not. If I would not be able to buy it twice I don’t buy it but if I can without breaking my budget, I’ll spend my money. Being responsible with my money is something I pride myself in because I’m extremely picky with what I spend my money on.

  2. At the heart of financial success lies responsibility, self discipline, and respect for one’s own self and the society they live in. See, money is a tool which connects all hard-working individuals into a woven unit of progress. And that tool can be harnessed for the better, or unfortunately, for the worse of society. I currently work as an intern over the summer, making $11 an hour. I know I have responsibilities to pay like car insurance, gas, and meals I eat on-the-go. Because of my situation, I’ve become more self-aware and responsible than ever before; and not just with money, but with myself as a person.

    Here’s the thing – as teenagers, our brains aren’t fully developed yet; we’re just older kids, at the end of the day. Whenever we get a paycheck, or $20 from our parents, or find a lost $5 bill lying on the floor, our minds are naturally wired to go crazy and spend it on whatever we possibly can. I’ll admit, I suffered from this myself when I got my first credit card. Spending $10 and $15 here and there (which seemed like no big deal) would slowly creep up on me; when I got my first bill at the end of the month, I realized my mistake. But as I worked more and more, putting more hours into my summer job, that paycheck I earned with my own work ethic felt so amazing. I knew I had earned 100% of that money; but this time, I truly felt something different: pride and accomplishment. That money I earned could be used for whatever I wished. And, as this article states (which I couldn’t agree more with), there’s always an impact being made when you use that money – whether you donate it to charity, invest it in the stock market, or even spend it on buying McDonalds for you and your friends!

    So each time I take a swipe at that precious, gold-plated credit card of mine, I remember my financial duty and ethical responsibility as a person who wants to make a difference in today’s society: Whether that comes from $1, $10, or $100.

  3. Clearly, there are many factors that can lead a consumer to the tipping point decision of whether or not to pirate that new music album or to purchase it with their own money. However, I believe it is not as black and white as this scenario. Sellers also play a very large role. I think that in all circumstances it is up to the seller to determine a fair and ethical price for their product or service. This idea can apply to a student who cannot afford to go to the college of their dreams as well as to an adult who simply cannot afford proper health care.

    When it comes to health care, many private health care insurance companies artificially drive up the costs in order to create a greater profit for themselves. This can be to the dismay of many Americans as they can’t afford their medication. One example of an artificial hike in price is for the drug Daraprim. Daraprim is a medication that people suffering with HIV/AIDS or cancer are required to take. After the exclusive rights to Daraprim was bought by Turing Pharmaceuticals AG many people were unable to gain access to this necessary medicine as they raised the price by 5,000%. This process was perfectly legal, but due to the state of American health care we were at the mercy of this company. Medicare, one of the largest US health care programs for people who are 65 or older or who suffer from disabilities is legally not allowed to negotiate the cost of medication either, meaning that Medicare has to pay full price and the individuals in turn have to pay a much larger fee. I find this completely unethical that corporations can have complete control over its consumers is borderline communism and goes against the American culture.

    Another large problem with America today involves for-profit/private colleges. Many colleges might be tempted to overprice tuition to maximize profitability. As a result, this can cause students to take out loans which they may never pay off. This is a huge problem in the America as going to college is more desirable now than ever. College is seen as a required part of the education process and not attending will most likely leave you with a much worse salary and/or job. Some private colleges have owners and investors whose goal is to make as much money as possible. There are alternatives such as going to a state funded or online college. However, they may not be seen as prestigious as private colleges, which may lead to lesser jobs once a student graduates. Due to America’s current attitude toward education, these prestigious, for-profit colleges have an imbalance of power which creates an odd supply and demand scenario.

    These are just two examples where suppliers can weild greater power than the consumer. This can occur anywhere, throughout the world in many industries. We need to be aware that the burden of ethics lies not only on the shoulders of the consumer but with all players involved in the transaction. An unstable balance of power can lead to a problematic economic ecosystem, and we need to be aware of the ethical challenges that can present themselves, and realize that not everything is as black and white as it may appear.

  4. My grandparents and my parents are business people, and so one of their goals in raising my brother and I is teaching us the importance of handling money and using it wisely, and that has been the greatest influence in my financial views. Ever since I was little, my grandma would give me and my brother money and teach us how to save up and not spend it on the first thing I see, because as a kid, if you’re given a dollar, the first instinct you have is getting candy or some toy; but it isn’t the wisest decision one can make with money; and so she would give us 5 dollars and see what we did with it by the end of the week, and give us another 5 and so on. She would check and see if we made any investments or anything different with the money, or if we just spent the money and were broke by the end of the week. My brother and I eventually learned to save up and start our own mini business. So what I did was I bought a product called “Rainbow Loom” (which was maybe about $15 plus rubber bands) and make bracelets out of rubber bands. I would wear them to class, and the other kids would see them and ask where I got them from, so I would sell them at my Tae Kwon Do academy for $1 each depending on the complexity of the bracelet and if it was exclusive colors, like glow-in-the-dark. At the end of the week I had $30 dollars and my brother wouldn’t have anything but candy wrappers, eventually he would catch up. I ended up making a profit of $500 by the end of the school year. But the point of this little story was to explain that you have to be wise with money. You could spend it on the first thing you see, but what if you save up and invest the money into something worth while, and then make wiser decisions when making a purchase. So, if I am going to spend money, I make sure that I actually need the item I am purchasing, and if it’s worth my money, then I’ll consider it, but if not, why buy it?

Join the Conversation