By Dawn Onley

Each year around this time, I relish the beautiful photos flooding my social media accounts of the graduates – often posted by their proud parents. High school graduates. College graduates. All of these pictures make me smile. They have put in the work and they are reaping the just rewards for their efforts.

In the coming months, parents will scurry about making sure these newly minted adults have everything they need for their dorm room or first apartment. They will prepare them as much as possible for the freshman semester or the first day on the real job. Somewhere, in between all of the excitement, running around, angst and preparation, I hope parents will consider sitting their children down for a discussion on a topic that is vitally important to their future success – financial management.

Parents play a vital role in shaping how our children view money, how they handle credit, how they embrace saving and investing, how they prioritize, how they live, what insurance coverage they elect, etc.

We are in the perfect position to use our past failures and successes to teach our children some important lessons on the best ways to approach financial decisions. We should drive home the point as early as possible because money mistakes are costly. Decisions, or lack thereof, that are made in our late teens and 20s have a way of shaping our 30s, 40s, 50s and beyond. Getting a great jump start is crucial to becoming financially adept and stable, starting a nest egg and laying the groundwork of a firm foundation from which to build.

Parents should stress the importance of paying down student loans and credit cards – if they have both or either – quickly and diligently. We need to let our children know how important good credit is and the numerous ways they’ll be penalized for bad credit – from high interest rates to even job denial. We should advise them to start investing early for retirement and to put a set amount of money each paycheck into a savings account earmarked for emergencies. We need to promote the benefits of giving back – not just financially but with their time and talents.

They need to hear from us that good money management requires them to be responsible. This doesn’t mean they can’t go out to eat, buy nice clothes and have fun, it means that all of this needs to be in proportion to what they earn and that saving should always comes first. They need to know about the stock market and how it works. We need to preach less consumerism and more money in the bank.

As they grow up, our children pay attention to how we handle money, how we discuss money in their presence and how much/little we save. To be honest, they have probably already picked up some lessons from us – both good and bad — on whether we overextend, run away from our financial obligations, donate to charity, have a rainy day fund, live within our means, live on credit, borrow, lend, and/or invest, just to name a few examples. They have probably watched us during the moments when we seemed anxious, worried, or when we experienced tough financial times. If we say nothing, chances are greater that they will mimic some of our behavior, particularly the bad stuff.

Don’t fret. We should view this as a blessing in that we are able to give our kids the in-depth advice that we probably never received from our parents, but that could have benefited us greatly.

Start the conversation. You can do this by: 

• Telling them about the benefits of setting a budget and keeping track of their expenses.
• Helping them with delayed gratification. (e.g. tying their immediate goals like a new car, vacation or graduate school to short- and long-term savings accounts and not credit cards and loans).
• Discouraging significant new debt (piggybacking from above) unless they have the savings to pay for it or to pay significantly on it to reduce financing charges and decrease their monthly bill.  
• Promoting healthy money habits that are not only beneficial now in their early adulthood, but will later guide them through their child-rearing, mid-life, and seasoned working years.
• Encouraging them to sacrifice a bit now so they won’t have to do as much sacrificing later.
• Explaining the importance of building a legacy that can benefit their children and children’s children down the line. Let them know that this is how the affluent have done it and that it is possible for them to improve the trajectory of their lives if they display the same hard work and diligence with their finances that they displayed while going after their diploma or degree.
• Informing them that money is not evil. Money buys options.

For kids going off to college, it’s equally important for you parents to have the talk. Creditors have a way of seducing broke college students — eager to start taking on grown-up responsibilities — with sexy introductory offers that quickly balloon to insanely high interest rates. Get to them before these predatory credit card companies do. If you want them to start building their credit, help them find a credit card and negotiate the rate, even volunteer to help them manage it – to protect them from splurging.

Don’t stop there. Let them know early on about the health insurance you have them under – what it covers and how much you pay. They see the big annual tuition costs posted on the college Web site each year, but let them know what this translates to in monthly payments, after their grants, scholarships and loans are figured in.

Talk money to them now — no holds barred — to help them understand.

Sure, they’ll eventually figure it out if we don’t talk to them about finances. Yes, it would have been wise to start much earlier. But a frank discussion now may still help them avoid some pitfalls along the way. Plus it opens the dialogue to more money conversations in the future.

This is a good thing. We want our kids to be smart financially and to make good decisions.

They’ve graduated. You’ve celebrated. Now it’s time to have the talk.