‘Tis the Season!
Well, not that season, but another highly anticipated one: graduation season. Hundreds of thousands of college and high school graduates are donning caps and gowns, shaking hands, having parties, and most likely cashing checks. The real question is what to do with all of this money?
Let’s break our discussion into two categories: high school graduates and college graduates.
High School Graduates
We’ve talked about it periodically: most kids aren’t taught anything about how to handle money and for some, graduation gifts can be their first experience with large amounts of cash. If there’s not an exact plan, it can blow away faster than the autumn leaves. This is job number one for parents: sit down with your kids and discuss what the plan is with the graduation money. Here are the top 3 things high school graduates can and should do before cashing a single check.
- Establish the maximum dollar amount of your graduation gifts that you’ll allow yourself (or your kid) to spend on fun. I don’t have any problem with high school graduates blowing a certain amount. I mean, it is a joyous occasion and high school graduations should have a certain amount of indulgence. But, just like anything finance related, you have to go in with the end in mind. Failing to plan is planning to fail.
- Decide what’s going to be set aside to be spent during the first semester of college. Assuming you’re heading to college in the fall, no matter what you think you’ll need from graduation gifts, you’ll want more. Accept and embrace the reality: college will cost more than you think. If you can set aside a couple hundred dollars today for those rainy October weekends far from home, you’ll feel a lot less guilty about skipping the meal plan and ordering a pizza for your roommates.
- Take at least 1/3 and either invest it or give it away. Those two options sound like opposites, but they require similar mental acuity. We only give things away when we have an abundance mentality – we only invest if we have a strong faith in the future. Take one or two hours and pick a solid blue chip company, set up an online brokerage account, buy some stock and don’t touch it for 30 years. You’ll thank me later. Oh, and don’t forget to reinvest all your dividends from your graduation gifts! You’ll want those growing, too!
Don’t let this great opportunity for teaching kids about money slip by. There are only a few “found money” times throughout one’s life. Use graduation gifts wisely. Any high school graduate should be able to take this money and use it to get ahead in life.