“If I knew grandkids were this fun, I would have had them first!” This might be my favorite quote from any client over the past 9 years. And I believe it is true. While I do not have grandkids, watching my parents spoil our two daughters looks like a lot more fun than the constant changing of diapers, picking up spilled milk and the early 5:00 a.m. wake-up calls. Our Bobo and Lovey (what our kids call my parents) have become pros at pumping our oldest full of sugar and having countless games/activities planned for when the grandkids come over. We always seem to pick up our girls right as the sugar-high has worn off and everyone is tired/cranky! Needless to say, raising children is not an easy task and can be a challenge at times. I am reminded of the old saying… “the days are long but the years are short.”
We often are asked by clients for suggestions on how to help children (and also grandchildren) navigate the post-college financial transition. This navigation can be messy, complicated, and is often difficult for the unprepared parent. We can suggest four time-tested principles to move your child toward financial freedom upon graduation.
- Let your child make the decision: Encourage your child to make as many financial decisions as possible. Start early with “small” decisions and gradually increase the scope of the decisions. These financial decisions are at the core of having your child experience financial freedom. Life is all about choices and we spend money on what we value. Can I afford this expensive apartment rent in the trendy part of town? What can I afford to pay for a new car? Do I really need the new iPhone? Do I need a credit card(s)? Let your children make these decisions. While it can be hard to watch your children make the “wrong” decision, life lessons are best learned by the experience of making mistakes. With this being said, when your children ask you for advice, feel free to speak honestly and provide guidance.
- Communicate expectations: Parents need to intentionally address what they expect of their children after graduation. Can they live at home? If so, how long? Will they be charged rent? Who will pay for travel expenses on a family vacation? Should the child expect any financial assistance with big ticket purchases (wedding, down-payment on a house, etc.)? Maybe you are looking to provide an allowance to your child as he/she “gets their feet under them” for the first few months out of college – how long will this allowance continue? These are good things to communicate (and write down) with your children as they approach independent living so there are no surprises when Mom and Dad say “no” for the first time. In other words, you want to clarify and communicate rules for the “bank of Mom and Dad.”
- Don’t fix ALL of the problems: This principle can be the most difficult. As a young father, I can sometimes think it is my job to make my child’s life as easy as possible. I can find myself wanting to put my oldest daughter in a position where she cannot fail. For example, we are currently teaching Hallie (our 2 year old) the ABC’s. We have a puzzle that has all 26 letters on it. While the W and the M are similar shapes, they only fit into their respective hole in the puzzle. When Hallie struggles to force the W into the M hole, she becomes frustrated and I feel the urge to just fix the problem for her. There have been multiple older (and wiser) parents in my life who have explained the constant handling of adversity for your children can do more harm than good. It is the parents job to make your child physically and mentally resilient. One of the best ways to make your children resilient is by letting them fail. Life is hard, and the earlier your child can understand this, the better prepared they will be.
- Encourage, encourage, encourage: This might be obvious but it is worth noting. Children of all ages need AND want to be affirmed by their parents. I am the perfect example… while I have been working with my Dad (and partner) for 9 years, it always feels good to receive encouragement from him – whether that is something personal or at the office. I am willing to bet that your children feel the same way.
Takeaway
For those that have children, you know that raising kids is difficult but also very rewarding. When your child graduates from college, you are transitioning from your role as a parent to your new role as a consultant. Through many conversations with clients about their children, I am convinced that most people reading this blog have done an A+ job in the parenting department! You have raised your children to manage their own lives, become good citizens, and continue on a path to financial independence.
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Matt Price serves as a Partner and Senior Vice President for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their two daughters and their family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 9 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes that everyone needs a wealth coach!