You’ve probably taken some time to frame those cherished photos of your children on their graduation day. Now, it’s time to face the reality: they’re heading out into the world. Are they ready for what’s next?
by Alicia Wanek
If your child has just graduated from college and is preparing to dive into adulthood—moving into their own apartment, starting their first job, and managing their finances—it can be a daunting experience for both of you. You hope you have equipped them as best as possible. If your child has just finished high school and is heading to college dorms, you may still have some influence over their financial habits. This is a critical moment to ensure they understand the value of money. But how do you go about it?
Work Together to Create a Budget
Chuck Cowell, Dallas Market Chairman at Guaranty Bank & Trust, advises collaborating with your child to set up a personal budget. Start this process during their teenage years and continue to reassess it as they transition into college. “Even if they only receive an allowance, encourage them to plan for their weekly or monthly outings and necessary expenses, while also considering future events they’d like to attend,” Chuck suggests. More importantly, he emphasizes that “when the money runs out, it runs out. Missing out on a concert, party, or trip due to poor budget management can be a powerful lesson for future life challenges.”
Teach Them to Distinguish Wants from Needs
Bryan Camper, a certified financial planner with Camper Rogers, echoes Chuck’s thoughts but stresses that children may first need help differentiating between wants and needs. As adults, for instance, they must understand that paying rent should come first. He recommends breaking down their expenses, stressing that “if they manage their responsibilities, we’ll assist them with their desires.” This approach fosters the understanding that money is “earned” rather than simply “given.”
Additional Suggestions for Fostering Financial Independence
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Gradually Increase Their Fiscal Responsibility. Start by allowing them to make decisions about their own finances. For instance, give them a clothing budget at the year’s start. They can choose between a few designer items or an entire wardrobe from a thrift store, but you must stick to the set amount.
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Encourage Early Banking Practices. Allow them to open their own checking account while you maintain access to their online banking or co-sign the account. As they navigate college, monitor their spending habits to pinpoint issues early. For example, frequent ATM withdrawals might indicate a need for a conversation about their spending choices.
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Impose a Strict Budget. Bryan cautions that “an unrestricted student with newfound money and freedom could lead to trouble.” He recommends establishing a strict monthly budget so they are less prone to financial pitfalls.
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Share Financial Experiences. Chuck advocates discussing finances openly with older children to demonstrate that everyone has limited resources and must make choices. Bryan adds, “Share examples of both your successful financial choices and your missteps,” hoping they can sidestep the same errors.
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Encourage Earning Before Graduation. Bryan highlights the importance of your child having their job before graduating from college. Having their own earned money helps them learn its true value, leading to more thoughtful spending.
- Allow for Occasional Financial Missteps. Bryan acknowledges that they will make mistakes; it’s inevitable. However, Chuck suggests allowing them to “experience some discomfort.” If they believe that their parents are always a financial safety net, they might disregard the lessons of budgeting and planning. It’s vital for them to recognize that resources aren’t infinite. Let them learn from missteps, even if it means forgoing professional help and having them work off their debt. There are always strings attached to financial “gifts.”
Bryan advocates that parents should purchase The Complete Guide to Personal Finance: For Teens and College Students by Tamsen Butler (available on iBooks or Amazon) and ensure their children read it. Ultimately, Chuck states, “All you can do is plan, pray, and adjust!”
