This May Be The Most Important Talk You Have With Your High School Graduate

So you’ve made it through twelve years of school, and your “baby” is graduating and ready to embark on adulthood.

It can be a confusing and scary time for both parents and kids, whether they’re starting a new job right out of school or heading off to college.

But while most kids are thinking about getting a place of their own and starting a new journey, Mom and Dad have something else on their minds.

Just how are we going to pay for all of this?

Let’s face it – just because our children turn 18 doesn’t mean they’re prepared to go out into the world alone.  They still need us (whew!), and one of the most important things we can do for them is teach them how to handle their finances.

Whether they’re getting an apartment, going away to school, or even living at home for a couple more years, they’ll likely be working and paying some bills.

So it’s time to do a little financial planning for your newly-minted adult!

After the excitement of graduation wears off, take some time to sit down with your child and discuss their plans and what everyone’s financial role is going to be.

Are they going to college?  If so, do you plan to help out by paying tuition and other expenses, or will they be applying for student loans and working to put themselves through school?

Either way, they’re going to have to budget in one form or another.  Chances are, if they’re moving out on their own and have a busy schedule, their budget is not going to be first in their mind.

They’ll be tired and busy from studying or working and may get into the habit of ordering food or eating out too much.  Or they may not know what to buy at the store, leading to waste and high grocery bills.

Spend some time helping your child put a list together of staple items they may need and then help them comparison shop and put together a grocery budget, as well as a “household” budget of all their expenses for the month.

The hardest thing about budgeting for most young people is that they’re excited to be out on their own so they may overspend on entertainment, clothes — you name it.

But soon they find that they’re short on funds for the necessities.  Budgeting does not come naturally for everyone.  It takes practice, and it is a learned skill that takes time to develop.

This is one of the most important things you can help your young adult to learn and practice until they are ready to take over.

If you are helping with costs for college or your child is still living at home, it is still vital they contribute and that they are earning money that is factored into their monthly budget, depending on their bills.

In this age of online banking and retail shopping, nearly everyone needs a credit or debit card.

Parents are usually shaking in their boots at the thought of an inexperienced adult having a credit card, but there are several ways you can ease your child into this responsibility.

Secured credit cards are a good way to start building credit with boundaries.  You or your child can contribute a certain amount toward the credit line, limiting the amount your child can spend.

Most banks also offer accounts in which a parent and child can each be an account holder and each can have a debit card attached to the account.

Statements will come to both parent and child, and Mom and Dad can monitor purchases and balances online.  You can also add money to the account in times of emergency and keep an eye on their spending.

What about health and auto insurance, as well as budgeting for unexpected expenses like doctor’s visits and car repairs?

This is also something that should be discussed so that there is always an “emergency” financial cushion.  Whether it’s a savings account, a credit card supplied by Mom and Dad to be used only for emergencies, or some other savings plan, kids will learn that they always need to expect the unexpected.

It may seem obvious to us as parents, but new adults may not understand how to stay safe financially.

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Be sure to have a discussion on what to look for when shopping online – never giving their social security number online, looking for signs of fraud or identity theft, and being cautious with online ordering are all good points to go over before they go out on their own.

And it may be a good idea to set your child up with a fraud monitoring service that can call or send a text message when they see suspicious activity.  It’s also a good idea to research different credit cards that offer credit and fraud monitoring.

Last but not least, your child should know that they can come to you with any questions or if they need help – even if they’ve totally blown their budget and can’t make ends meet.

Then it’s time to get them back on the right track and help them learn from their mistakes.  Support and advice is not the same as enabling, so be careful not to continuously bail them out financially if they’re being irresponsible.

But… it does take time and they may need a second (or third) chance until they reach financial maturity.

It’s always a better lesson when it’s their money they’re spending, so make sure they’re somehow earning a portion of their expenses – even if they’re a full-time college student.

Congratulations on your child’s recent graduation, and here’s to their safety, success, and new-found financial responsibility on the horizon!

Do you have a recent high school graduate?  What are your tips for teaching them financial awareness and responsibility?  Leave us your comments.