When your graduate crosses the stage this month, they will take the financial reigns from you just as they take their diploma. Here are a few ways to help steer them towards success in their financial future.
Summertime is upon us here in Phoenix and so is graduation season. This major transition period for most from minor to adult means a subtle shift of financial control from parents to their newly minted college student. See more on MUST HAVE documents for new graduates in this POST.
Besides taking full control of their laundry and other household duties as they leave for college, these same students will now be confronted with handling their own money. For many parents, the thought is sheer terror, recalling past financial failures big and small with their children. However, we will look at some options for parents to utilize that encourage responsible spending and planning.
Utilize a Trust
One way of protecting your child, but still guiding them towards responsible financial planning and spending is to opt to roll any monetary graduation gifts into a trust, especially with high dollar amounts.
Then, the family can then work together to decide provisions for the distribution of the funds, like at graduation from college, at age 25, upon purchasing a first home, receiving a master’s degree and so on. Some even split the distributions up (say 50% at 25 and 50% at age 30) to ease the new beneficiary into money management and protect them in the future.
Ask for Direct Gifts for the Graduate
Close family members may want to shower the new graduate with money, but another option is to ask them to contribute directly to a specific gift (luggage, a laptop, a trip etc.). If they are set on money, let them know about your financial strategy and ask them to contribute to the newly established trust account itself.
A Small Indulgence
Another way to manage money during this time is to allow the graduate some type of controlled splurge. This may be a way to get your new graduate to agree to a trust going forward. It is also a great way to reward a good student for a job well done.
For specific strategies for your family, contact us directly! Ask for our new graduate discount and see our blog post about documents your 18+ year old should have.