Transitioning from high school to the next chapter—whether that be college, trade school, work, etc.—requires the ability to be prepared academically, emotionally, physically and financially. As parents, we take eighteen years preparing our children for all of these things, and yet when graduation approaches, we wonder if we have done enough.
Regrettably, we tend to give little attention to educate our young adults about finances as they step into this next phase of life. While it is important to talk about money early on with our children, it is even more critical to have these conversations as they get ready to go out on their own.
As a mother of two children in college, I realized a number of years ago how seldom my own children handled physical money. With most of our financial systems now automated, it is becoming increasingly more difficult to teach the value of money when it seems to show up magically, with the click of a mouse or push of a button. While some high schools teach finance courses, few of them deal with day-to-day, practical concepts.
Most of our children now are very adept at using systems like debit cards, credit cards, Venmo and other electronic fund-transferring systems. However, they need to understand both how to budget for each week or month and the difference between spending and discretionary spending.
To start with, I recommend having your child write down all the items they spend money on each week and month. Next, help them become aware of additional expenses.
My son is just entering his senior year of college, and I have tried to help him build on this concept with each new school year. For example, I recently worked with him to create a detailed list of all expenses he will incur when he graduates from college and enters into the working world. He was amazed at how much the average person needs to spend each and every month.
Once you have identified the expenses, discuss which items are essential and which are discretionary. This may involve some interesting dialogue. Next, give your child actionable steps. I recommend making them personally responsible for paying a certain number or percentage of their own expenses. You may choose to give them money regularly to cover these expenses, or you may have them not only be responsible for knowing the cost of things, but also for paying with money they’ve earned themselves.
In either case, it is important for them to get in the habit of paying for things themselves—essential items first, discretionary items after. No matter the age of the child when you start this process, each year you can build on the number of expenses they are responsible for weekly and monthly.
I acknowledge that, as parents, it is often easier just to pay for all these items ourselves. However, as with all learning, it takes discipline and time. If you engage with and help your children practice, they will have a much better understanding of what things cost and how to pay for them—an understanding they’ll keep for the rest of their lives.
Kristin L. Young CRPC®
Private Wealth Advisor, Ameriprise Financial, Inc.
Kristin Young, along with her two children, has lived in The Woodlands for over 17 years. Her son and daughter are currently studying at Texas A&M University. As the owner of Kristin L. Young, an Ameriprise Private Wealth Advisory practice, for over 25 years, she has dedicated time in her practice partnering with clients who are going through financial transitions. Having both her business and home here in The Woodlands, she is intrinsically involved in the community and loves to travel.