Give Your Graduate the Gift of a Financial Education

August 30, 2007 by Marcel

So, your little girl or boy has finally grown up and is about to graduate. They are about to face the scary “real world” without the constant guidance from mom and dad. You wonder, “What can I do for them before they leave for college that will have a lasting impact on the rest of their life?” Money Magazine has a great idea: give them a session or two with a financial planner.

What better to preempt those inevitable credit card offers and student loans? The financial planner can explain, probably much better than you or I can, the downward spiral that can occur when a person spends more than they earn. And, in college, what you earn isn’t much, so you have to be even more conservative in your spending. The planner can explain the long lasting financial effects of just one extra night of partying a week.

Aside from explaining what the student shouldn’t do with their money, they can also explain what they should do with their money. Right away the student can begin putting 10%+ of their income into a savings vehicle to jumpstart their road to financial independence. They can tell them about such wonderful things as compound interest and give them examples on why it pays to start early. Take for instance someone who starts investing $1,000 per year their first year of college versus someone who starts five years later. Assuming 40 years of investing at 8% interest, the one who started saving earlier will have nearly $94,000 more than the one who started later. Only five years earlier!

The glue that will hold the financial plan together will be the fact that the advice is coming from a 3rd party expert in the field of personal finance. (i.e. not mom and dad) This freedom from mom and dad allows the soon-to-be adult a chance to be independent and develop a confidence in their ability to handle their finances on their own. It will also allow them to be more forthcoming and honest about their concerns, fears, and hopes.

My recommendation is to find a fee-only planner as you don’t want someone trying to sell your child something when they are just supposed to be teaching them. The $500-$1000 you will spend will be a bargain compared to the alternative of a financially inept child calling you every few months for “just another loan until I get back on my feet.”

If you haven’t already, take a look at my article on 6 ways to increase your kids’ financial intelligence. It has a few tips on what to do BEFORE graduation, so your child will hopefully be interested in their finances when you give them perhaps the greatest graduation gift ever.

Photo: PublicRadio.org

12 Comments so far »

Lynnae @ Being Frugal said

am August 30 2007 @ 12:34 pm

That is a fabulous idea! I’m already determined that my children will know more about finances than I did before I left for college.
The Friday Gathering for 8/31/2007 | Gather Little By Little said

am August 31 2007 @ 6:25 am

[...] Dominance tells us to give graduates the gift of a financial education - I couldn’t agree [...]
come clean said

am September 1 2007 @ 3:35 am

This is one area that is truly lacking in our education system meaning that it is up to the parents to teach this stuff. I certainly wish I had known more going out on my own. I would have made some very different decisions in my early years.
Pinyo said

am September 1 2007 @ 1:26 pm

I agree, they should do a better job of teaching personal finance in school. I think starting from junior in HIGH SCHOOL, or even earlier would be good.

Excellent idea, and excellent post!
January said

am September 5 2007 @ 8:18 am

I could not agree more. You know I wish my parents had taught me about financial education when I was a kid. Maybe I would have achieved a lot more financial success than what I have now. Parents need to do this cos it’s suicidal not to. You won’t believe the number of my colleagues at work who can’t get a grip on savings, investment and retirement plans. I mean it sucks. Some are just leaving everything for the future.
Weekly Highlights and Carnivals - September 7, 2007 - FinancialDominance.com said

am September 7 2007 @ 10:27 pm

[...] week I submitted my post about Giving Your Graduate the Gift of Financial Education to the Carnival of Financial [...]
Erabulus said

am September 18 2007 @ 1:28 pm

Sound advice, although the session with the financial planner is best saved for when they graduate from college– most students don’t have any income to invest, so advice on savings and compounding is a bit early.

A good gift for a high school student about to head off to university would be “Your Money or Your Life”, or perhaps “The Richest Man in Babylon”. Both easy reads, that really drive home the importance of living within your means can have on your life.
Brian said

am September 18 2007 @ 1:40 pm

Erabulus: I agree with your suggestion of having a high school graduate read “The Richest Man in Babylon.” It’s a solid read for anyone getting started on the road to financial security.

However, I think a session with the financial planner would do a lot to instill credit discipline in kids before they start overusing credit cards for beer runs and pizza. The planner could also give at least a brief overview of investing to at least have the advice on the forefront of the kid’s mind.
Third Carnival of College and Finance | College and Finance said

am September 18 2007 @ 9:06 pm

[...] presents Give Your Graduate the Gift of a Financial Education posted at FinancialDominance.com, saying, “Explains why giving your child a session or two [...]
FinancialDominance.com » Weekly Highlights and Carnivals - Sick Kid Edition said

am September 21 2007 @ 10:17 pm

[...] week my post, Give Your Graduate the Gift of Financial Education, was included in the Carnival of College and Finance at College and Finance. This is my first foray [...]
Weekly Roundup #9 (December 22, 2007) - My Investing Blog said

am December 22 2007 @ 7:03 am

[...] to start saving. Very Billy Crystal-ish. 11. FinancialDominance pounds home the argument to give the gift of financial education to a graduate instead of the standard money and cars… 12. CreditCardsMoneyandInvesting crafted up a pretty good [...]
Information On College Savings said

am February 16 2008 @ 7:40 pm

What sort of College Savings Programs are Offered by the US Government or States?…

College education in the United State is becoming excessively expensive with each passing day. Various kinds of federal and non-federal financial aids are available for students However, not only are they difficult to obtain, but also they are often no…