How To Best Prepare Your Kids To Manage Money After High School

June 15, 2018

When I went away to college, I was completely unprepared to handle my own money. My family never discussed it with me, so when I went away to school, the peer pressure of having to look a certain way and the desire to hang out with friends quickly left me broke, no matter how much money I had.

If I could go back to 1990 when I graduated from high school (don’t do the math, I can’t believe it’s been that long either), I wish my parents would have better prepared me for managing my money in college by doing the following:

Give an allowance that includes ALL monthly expenses

How it went wrong for me: My parents gave me money as I needed or wanted while I was in college, which was a mistake. Typically, I would ask for money for the movies or to cover my expenses for being on the track team such as travel, hotel and sneakers…oh and I forgot – the money to get my hair done. I learned in college that I was high-maintenance and could not afford my own upkeep.

Do this instead: Add up how much you spend on your kids’ activities, personal care and outings and giving it to them to manage themselves in the months before they move out. If you’ll be continuing to support them in college, stick to that amount. Then if they run out, it’s up to them to figure it out.

Teach them to plan for upcoming expenses and budget the money they have

How it went wrong for me: One of my favorite quotes about budgeting is from John Maxwell: “A budget is telling your money where to go before wondering where it went.” My way of budgeting in college was more like my money telling me where it wanted to go as soon as I got it. I had no concept of planning ahead and therefore was always feeling like I didn’t have enough.

Do this instead: Walk your child through the budgeting process to get them thinking about upcoming expenses and how to create and stick to a budget. A friend of mine opened a checking account for her child when he was in high school.

She deposited money into the account monthly for his expenses, then helped him to create a budget using online software like Mint. To stay on top of it, she had a weekly budget meeting with him where her son had to show her how he spent his money for the past week and how much he had left.

She did this while he was in high school so that the money management habits would kick in by the time he went to college. Consider doing something similar with your child to help create the habit of budgeting and thinking through their financial needs.

Don’t forget to teach about credit

How it went wrong for me: When I was in college, it seemed like every credit card company known to man was on my college campus, and I took full advantage. (you can read more about that here) Even though it has gotten better, credit card companies still market to college students who have no idea what they are signing up for.

Luckily, the CARD Act of 2009 provides some level of protection to college students by cracking down on granting credit cards to students under the age of 21, but eventually, they will be eligible for a credit card.

I thought credit cards offer “free” money that I could take my time paying back. I had no idea that in addition to paying for the items I bought, I was paying an additional 25% in interest.

Do this instead: If you decide to give your child a credit card, first make she has good money management skills. Control the credit limit and check in weekly at first to make sure the credit card is being used wisely. Then switch to monthly meetings.

The last thing you want is for your child to start life out buried in avoidable credit card debt and with bad money management skills. Help your children understand that the money is not free and that the less they pay each month toward their credit card balance, the more money they will pay in the long run.

A long-term pay-off

Nobody wants their kids still relying on them financially once they’ve flew the nest. By investing some time before they head off into the real world to make sure they are clear, you could save yourself years of stress. Not to mention, having financially responsible adult children saves you money! Who knows, by helping to teach them better, you may learn something about yourself as well.