High School Graduation: A Good Time for Financial Planning

Whether your child is graduating with their high school diploma or completing higher education, it’s important to help them plan for their financial future. You want to set a strong foundation for long-term financial stability by broadening their scope of financial literacy. Sharing the following tips can help prepare them.

Budgeting Expectations and Boundaries

Less than half of high school juniors and seniors in the United States know how to check their credit score or maintain a budget. Nearly one-third of young adults have not set up a budget because they believe they don’t have enough money to need one.

Without a budget, they can end up creating a huge stumbling block for financial success. A budget can help them understand their financial situation. With one in place, they can better control where money goes instead of wondering where it went.

Before creating a budget, talk through short- and long-term goals like home ownership or starting a business or a family. Write out the three or four most significant accomplishments to achieve in the next five to 10 years.

Next, narrow the focus to two things to accomplish regarding finances within the next year such as:

  • Pay off credit card debt, student loans, as well as other debt to improve your credit score
  • Start a new career
  • Secure a credit card in your name and begin to establish a credit history
  • Build an emergency fund in a savings account

Then further narrow the focus on what they can accomplish in the next month or two. It might be saving a certain amount of cash or not using credit cards for 30 days.

Set Up a Budget

Setting up a budget requires gathering paperwork like bank statements, pay stubs, and investment accounts. From this data, calculate expected monthly income and typical monthly expenses. The hope is that monthly income exceeds monthly expenditures, including rent, utilities, food, and entertainment.

If not, it’s time to find some possibilities for cutting costs. Some expenses are variable. Find a way to balance out increases in monthly cash flow with extra savings throughout the year.

Track Expenses

This step is where many people attempting to budget tend to fail because they don’t follow the budget they created. Track your daily transactions and subtract them from the proper budget category. Monitor expenditures using apps, spreadsheets, or pen and paper. Discuss what will work best to stay disciplined, as living within a budget is the first step to building financial security.

Financial Literacy

Parents can help their young adult children by teaching them to set goals, create a budget, and manage their personal finances. It may be tempting, but avoid routinely bailing them out financially if they aren’t following their budget.

If you must provide financial assistance, make it temporary. Learning to save and live within or beneath their means in these early adult years is crucial to their success. Whether they are high school students or even younger, teaching them financial responsibility will serve them well going forward.

You may want to discourage children from taking the summer off after college. In a competitive world, losing time in the business world can equate to lost opportunities. Waiting for the perfect job is not a realistic approach. The sooner they begin building a resume, the better the chances of finding that dream position.

Estate Planning Attorneys

An estate planning attorney can play a valuable role in assisting parents of graduates. They can, of course, assist parents in planning for their own financial future.

But they also can help your adult child understand long-term financial goals. Your child may want to start a business, save for retirement, or buy property at some point. An estate planning attorney can work with them to set attainable goals and develop a plan to achieve them.

Start Investing Early

Long-term financial growth typically begins with a modest initial investment when young. Time is on your graduate’s side to allow compound interest and savvy investing to accumulate wealth.

Encourage them to take advantage of employer-sponsored retirement savings plans, such as 401(k) or 403(b). If their employer offers matching contributions, all the better. Additionally, explore individual retirement accounts (IRAs) or other investment vehicles suited to their goals and risk tolerance.

Consider Insurance Coverage

Evaluate insurance needs, such as health insurance, renters or homeowners insurance, and vehicle insurance. They may be young, but having a grasp of disability and life insurance is important.

Unexpected life events can happen at any time, and these services can protect them and their loved ones. Typically, the healthier and younger you are, the lower the premium cost. Many policies are flexible to regain premium payments in the future if you no longer require the policy.

Get a Power of Attorney and Patient Advocate Designation

Your child may think estate planning is unnecessary. Yet a medical advance directive  is critical since accidents and loss of capacity can happen at any age. In Michigan, every adult can and should have a Patient Advocate Designation to appoint an agent to make medical decisions if they cannot do so and to outline their preferences for medical treatment if they can’t communicate their wishes.

If they start a family, creating a will is just as critical. The will explains how to distribute their assets and personal property to their loved ones. They also can appoint guardians for minor children.

Finally, every adult should consider having a Power of Attorney to sign legal documents and act for them with respect to financial and legal decisions, if they are unable to do so. Many parents are unaware, for example, that they will not have access to their adult child’s medical or financial or educational records, even if they are paying for the child’s education. A Power of Attorney can authorize a parent to act on behalf of a child if necessary.

They can modify or completely rewrite their wills as they age and circumstances change.

Parental Input

For your child to receive financial messages without sounding like another money lecture, stick to the basics, such as:

  • Basic budget and goal-setting
  • Now versus later thinking
  • Delayed gratification and tradeoff requirements necessary to attain goals
  • Establishing and maintaining good credit
  • Saving versus investing and the importance of starting early
  • Bigger-picture planning in financial life management

Once they understand the importance of legal and financial planning, they’re ready for the next steps in financial responsibility and setting realistic expectations around money.

Fostering Financial Independence

Some adult children will be more willing than others to heed parental advice on creating a financial plan. You may want to provide some modest capital for early investment purposes. If you worry they might squander the money rather than watch it grow, there are strategies which you can implement through your own trust or estate plan.

Likewise, you might consider finding a financial planner for them and setting up an appointment. This could even be part of their graduation gift. Learning about the meaningful impact they can have on managing their finances will boost their confidence about money matters.

All parents want to see their children do well in life. A large part of their success is contingent upon achieving financial independence. Educating them early about building wealth can give them the clarity, control, and confidence they need. Partner with them to create a strong financial foundation that will serve them throughout their lives.

If you and your child are interested in obtaining guidance  with estate planning, including creating a Power of Attorney and Patient Advocate Designation, contact the office of Wenzel Bennett & Harris, PC at (989) 356-6128 and speak to our client care specialist about scheduling an Estate Planning Consultation.


If you have specific questions about your situation or would like to learn more, reach out to the team at WBH here.

Read more articles:

In 2022, Social Security Beneficiaries Will See the Biggest Increase in 39 Years

The year was 1983: The U.S. invaded Granada. A gallon of gas cost 96 cents. Michael Jackson’s ‘Thriller’ video premiered. That year was also the last time that Social Security recipients saw a cost-of-living increase steeper than the one just announced for 2022. This...

Using a Roth IRA as an Estate Planning Tool

A Roth IRA does not have to be used as just a retirement plan; it can also be a way to transfer assets tax-free to the next generation. Unlike a traditional IRA, contributions to a Roth IRA are taxed, which means that the distributions are tax-free. Also, unlike a...

Older Adults Lack Information in Search for Long-Term Care

According to a recent national study, nearly a quarter of Americans aged 50 and older say they – or a loved one – needed long-term care in 2022. The findings further suggest that seniors and their caregivers could benefit from more consumer-friendly information and...

When Should I Include a Pour Over Will in My Estate Plan?

In creating an estate plan, you are proactively taking steps to ensure that your assets will be distributed according to your wishes in the wake of your death.  One tool available to you in estate planning is known as a trust. There are numerous kinds of trusts. If...

IRS Raising Annual Gift Tax and Estate Tax Exclusions in 2023

Although inflation is generally nothing to be pleased about, the IRS recently announced inflation-adjusted changes to the gift tax annual and estate tax exclusions for 2023. If you are considering wealth transfer tax planning, these are welcome increases. Gift Tax...

Majority of Adult Children Cannot Support Boomer Parents, Surveys Find

A recent survey by the American Advisors Group (AAG) finds that 55 percent of adult children say they are not financially prepared to help their Baby Boomer parents cope with rising inflation and living expenses. “Americans want to see their parents age with grace and...

How Do You Choose the Right Person for Your Power of Attorney?

A Power of Attorney is a document that authorizes someone to represent and act on your behalf should you not be in a position to do it. The person you name to act on your behalf is known as the “agent.”  Your agent may need to sign contracts, handle investments, sell...

Medicaid’s “Snapshot” Date and Its Crucial Impact on a Couple’s Financial Picture

When a married couple applies for Medicaid, the Medicaid agency must analyze the couple’s income and assets as of a particular date to determine eligibility. The date that the agency chooses for this analysis is called the “snapshot” date and it can have a major...

Medicaid’s Attempt to Ensure the Healthy Spouse Is Not Impoverished: The CSRA

Medicaid law provides special protections for the spouses of Medicaid applicants to make sure the spouses have the minimum support needed to continue to live in the community while their husband or wife is receiving long-term care benefits, usually in a nursing home....

Preserving the Family Vacation Home for Generations to Come

Summer is winding down and if you are one of the lucky ones, you got to spend some time at a family vacation home. How do you make sure your children and grandchildren can enjoy that second home as much as you did? The question for owners of vacation homes in planning...