The Best Graduation Gift of All: Money Skills for Life

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Graduation Day
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In her more than two decades as a wealth management adviser, Ellen Miley Perry has seen the differences between wealthy families who flounder and those who find the time to develop emotionally and financially healthy connections and to raise financially savvy independent adults.

"Family relationships are the most intense set of relationships anyone experiences," says Perry, the author of "A Wealth of Possibilities: Navigating Family, Money, and Legacy." "We're more reactive to each other, which makes things more complicated."

While it's tempting to blame family issues on money -- or the lack or abundance of it -- Perry has found that money simply magnifies personal and relationship dynamics that are already present.

"Wealth just takes your experiences and makes them larger," she says. "For example, if you tend to be a nervous person you may be paranoid if you become wealthy. If you're a kind person, as a wealthy individual you'll be kinder."

Raising a Financially Savvy College Grad Starts Early

Perry's advice on helping families flourish financially and emotionally applies to all, regardless of their level of financial achievement. Here are a few of her tips for raising financially responsible young adults.

1. Do some pre-college financial prep. "Wealthy families sometimes have trouble raising financially smart kids because those kids have had everything handed to them," says Perry. "I'm a big believer in kids having summer jobs and handling their own money. There's nothing like day-to-day lessons to teach you money management."

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Regardless of the family's means, Perry says, an allowance can be an excellent tool to teach kids about money, as long as the parents don't bail the kids out if they run into hardship.

"Don't tie the allowance to chores, either," she says. "Chores should be done just because that's part of being a family. Even if the family can afford to have help, kids should do their own laundry and have other real-life experience before they go to college."

When kids finally graduate college, parents need to establish guidelines as to what help they'll give and for how long. Many post-college students struggle to find a job that pays enough to cover their rent and student loan payments, but, says Perry, "if you don't experience hardship, you don't learn."

2. Cultivate connectivity. It can be tough to reconnect with post-college offspring, but it's easier if you have a strong connection from early childhood.

"There have been multiple studies done that show that no matter what your economic background is, the most important variable that will indicate how successful a child will be as an adult is how connected that child feels at home and at school," Perry says. "You need to develop strong communication skills, learn to listen and to see your children as they are rather than correcting their thinking."

The most successful parents are those who are "intentional" parents, focused on setting an example for their children. "If you want your kids to be compassionate people and good listeners, then you need to demonstrate those skills with them," says Perry.

As your adult children begin to make their way in the world, it's time to give them the space to make their own decisions while staying emotionally available to listen to them and to give advice when asked.

3. Let your older kids solve their own problems. Money issues notwithstanding, a common trait among loving parents is to help their kids manage every problem they encounter.

"One woman I know got a call from her 26-year-old daughter who was stranded after her flight was canceled," Perry says. "The mother told the daughter to wait for a few minutes, then called her back with a rebooked flight. The better response would have been to talk through the problem with the daughter, to generate ideas rather than to solve the problem."

Perry says solving problems for your kids, whether financial or emotional, sends the silent message that the kids can't solve the problem themselves.

The goal is to instill the opposite attitude in your children -- the skills and confidence to face financial roadblocks on their own.

Financial independence isn't just good for your kids as they reach adulthood, it's good for you. Not only will you have the emotional satisfaction of having raised a responsible adult, but you won't be shortchanging your own financial needs for retirement savings and other investments every time you bail out your 20-something "kid."

The Best Graduation Gift of All: Money Skills for Life

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If you're looking to build up a solid credit history, you won't have any luck by signing up for a prepaid debit card. Why? Because none of the activity on a prepaid card is reported to the three credit bureaus (Experian, Equifax and TransUnion). Plus, you're going to get slammed with fees on prepaid cards like monthly fees, dormancy fees and, get this, a fee just to load money onto the card –– that's the entire point of a prepaid card!

 

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The days of free checking are disappearing. And unless you maintain the bank's minimum balance requirement, which can be $1,000 to $1,500, you're throwing away $10 to $12 per month. If you've been charged this fee before, consider switching to an online bank or a credit union. You'll find there are either no or fewer fees to deal with.

 

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When you get an email from your favorite store letting you know they're having a sale, this reminds you to head over to the store. If you hadn't received that email, the store wouldn't have even been on your mind. Unsubscribe. The same goes for those daily deal sites – unless you're in the market for something specific (a trip to Europe, new shoes or a restaurant deal), being reminded of random flash sales is a sure-fire way to start spending beyond control.

 

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Most of us are too scared to ask for a higher salary. But if you don't, you're leaving money on the table. Negotiating on your first job out of college might be a tad risky, but don't feel afraid to ask for more money on future job offers. Plus, negotiating reflects persistence and that "stop at nothing" attitude that employers expect. Do some research in your field to find out what someone at your level is earning, so you'll know whether to ask for more during the hiring process.

 

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If your employer contributes to your 401(k) (a retirement account that lets you automatically contribute a portion of each paycheck), then you should contribute, too – up to the employer's match. If you don't, you're basically throwing away free money. If they don't contribute anything, you might be better off going a different route.


The fees are exorbitant (employers hire large asset managers to take care of the employee's 401(k) accounts, and that isn't free). In fact, a survey last year from Demos showed that on average, a couple could spend $155,000 in 401(k) fees over a lifetime. Instead, take ten minutes and open up a Roth IRA online from a discount brokerage firm. This is an account where you contribute money that you've already paid taxes on and your money will grow tax-free. Who knows where tax rates are headed (probably up), so get the taxes over with now.
 

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