Graduation Day!!

Graduation day is finally getting close. Your kids are ready for LIFE, but what about their finances?

Graduation day is fast approaching for so many kids and young adults. The U.S. Department of Education says there are over 3.6 million students graduating high school and another 3.9 million are expected to earn college degrees during the 2017-2018 school year, including post-graduate degrees. This means an estimated 7.5 million are now prepared to enter the workforce on some level and begin their financial journey ahead. Will they be ready?

Here are the top items you need to be sure your children know before entering the money jungle:


Long gone are the days of balancing checkbooks and writing down a budget on paper. It’s a good exercise to go through, but your children WILL NOT be budgeting this way. They will seek an app for that. Download a couple and try them out yourself and then show your child how to use it. The apps can link to your bank account so no one has to write in every transaction, although if you are uncomfortable with the link you can manually add transactions if you prefer.

My favorite budgeting app is EveryDollar created by Dave Ramsey. This app keeps things very simple and categorizes your spending into categories. It doesn’t try to include a lot of other items like investments, credit cards, and everything else under the sun. I think all the other “stuff” can get overwhelming especially for newbies. Did I mention the free version is great! Some others you may want to look at are (free versions and trials available):

o   Mint

o   Pocketguard

o   YNAB

Using Credit to their advantage

Society has learned to use credit as an emergency plan, and this is how we begin digging ourselves into a hole. It is essential for our kids to see credit as an opportunity to build something bigger, wealth! Let’s not only focus on teaching them what is right but also how to problem solve our mistakes. Make sure you cover the following topics about credit:

o   Credit scores and how they can hurt or help you – discuss how to correct them when things go wrong

o   How to pay off consumer debt; snowball (pay the smallest debt first) vs. avalanche (highest interest debt first)

o   Opportunity cost of racking up consumer debt

o   How to use credit for good


Our experience as parents has taught us time and time again that emergencies happen and they are not in your control. Your children think they are invincible and are accustomed to their parents taking care of everything. It is crucial to emphasize that children need to own their financial life, even when an emergency or unexpected crisis happens. Parents need to let go and let their babies swim! They CAN do it. Even if it’s through trial and error, they will learn to swim. Teach kids about:

o   Documents to keep and safeguard

o   Emergency funds – 3 to 6 months of expenses

Savings and Investing Account Types

Life is easier when you have a savings account; parents know that to be true. Savings and investment accounts allow us to travel down our financial path with a little less worry. The most valuable thing you can teach your children is to live below their means and that the act of saving is more valuable than choosing the investments. Teach them to AUTOSAVE! AUTOSAVE! AUTOSAVE!  Monthly contributions into savings accounts has to be a priority, and if it happens on its own, no one will miss the money. Life will go on, they will adjust and make due with what is left. Consider a brokerage account (see our post on how to choose one) and begin autosaving! Here are some types of accounts your child can open online easily.

o   Roth IRADo this now! Roth IRAs grow tax-free, and distributions are tax-free in retirement. For 2018 the maximum a person can contribute is $5,500 for the year. Distributions will be penalized a 10% fee if they are taken before age 59 ½.

o   Traditional IRA – These grow tax-deferred, but you will pay taxes on the growth when distributions are taken during retirement. Avoid distributions before age 59 ½, or a 10% penalty will be imposed by the IRS as it will be with the Roth IRA. Like the Roth, you can contribute only $5,500 each year. If you save into a Traditional IRA, contributions may be deductible.

o   401(k)s and other Employer PlansDo this now! Many young investors tend to put off the annoyance of signing up for the employer-sponsored retirement plans.  Make them do it! It’s so easy now to sign up and begin contributing. Employer matches are free money for them and it is critical to take them while they are young. There is a maximum savings of $18,500 allowed each year into a 401(k). The savings are added through their paycheck automatically and are pre-tax. The account grows tax-deferred and in retirement the distribution will be taxable as income.

o   Taxable account – This account will be added to with after-tax dollars, capital gains and dividends will be taxed when an investment is sold, and there is NO MAX on what you can save. These accounts are great for retirement and for shorter term goals. It is possible to set up auto saving into a taxable account via direct deposit from your paycheck, and you can even automatically invest in a mutual fund with that deposit. Set it up and let it grow!

It’s ok to need help selecting investments. Financial advisors can help, but your kids can educate themselves on the markets and mutual funds as a starting point. Go back to our previous post about how to select the right mutual fund. Show them what it means to be diversified and avoid putting all their eggs in one basket.


These basics will save your children lots of stress and frustration. It won’t matter what kind of education they get after high school if they can’t manage their money. A college degree will not teach them money survival! Talk to your children about the above topics but also teach them about your mistakes. They have been watching you and have learned what they know about spending and saving from your example. Send your kids into the world fully prepared and the analysts at and Key Analytics are here to help.

The blog post or newsletter makes general observations about markets, business, or financial trends and may provide advice about specific companies and specific investments. It does not give personal investment advice tailored to the needs, objectives, and circumstances of individual readers. Whether investment ideas and recommendations are suitable for individual readers depends substantially on the personal and financial situation of that reader, which KIT Today, as the publisher of the blog, makes no effort to investigate. KIT Today attempts to provide accurate content in its blog and newsletters to the extent such content is factual rather than analysis and opinion, but KIT Today relies primarily on information compiled or reported by third parties and does not generally attempt to independently verify or investigate such information. Moreover, some content and some of the assumptions, formulas, algorithms and other data that affect the content may be inaccurate, outdated, or otherwise flawed. KIT Today does not guarantee or take responsibility for the accuracy of such information. Please note that investing in stocks, other securities, and commodities is inherently risky, and you should rely on your personal financial and tax advisors. You should conduct your own due diligence in connection with any investment decision. Disclaimer of Liability: KIT Today disclaims any liability for investment decisions based upon recommendations, information, or opinions in its blog or newsletters. KIT Today is not soliciting you to execute any trade. Nothing contained in KIT Today’s newsletters is intended to be, nor shall it be construed as an offer to buy or sell securities or to give individual investment advice. The information in the blog and newsletter is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject KIT Today to any registration requirement within such jurisdiction or country. COPYRIGHT NOTICE: PRINT ONCE —- DO NOT FORWARD—-DO NOT COPY Current and past market commentaries are protected by U.S. and International copyright laws. All rights reserved. You must not copy, frame, modify, transmit, further distribute, or use the market commentaries, without the prior written consent. Any download from a secure website or email is meant for only the intended recipient of the transmission and may be a communication privileged by law. If you received this information in error, any use, dissemination, distribution, or copying of this email is similarly prohibited. Please notify us immediately of the error by return email Although email and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by KIT Today for any loss or damage arising in any way from its use.