How to Maximize Graduation Cash

The graduation season is fast approaching. With each day that passes, anticipation grows of the gifts and money a graduate will receive in celebration of their achievement. It’s crucial to plan ahead to maximize graduation cash before your young person dashes off to whatever lies ahead.

Even small gifts of money can add up to a windfall. A young person often receives more money at graduation than ever before. It feels like winning the lottery. How does an 18-year-old handle all that cash?

Your family might have goals for your young person’s finances, the proportion of gifts or income that should go toward saving, sharing, and spending. If so, your young person may be poised to handle a sudden influx of cash.

If your family hasn’t established that pattern, now is the time to start a conversation. Your graduate is on the verge of an important life transition and they still need financial coaching. As a parent, you still have a say in how they use their money, especially if you are contributing to their post-high school plans. Money they blow now might mean money out of your own pocket later.

It might be a long time before a young person again sees that much money all at once. So help your graduate decide where all that cash can make a real difference.

Tips to make the most of graduation cash

Talk ahead of time

Start to develop a plan by saying, “Let’s think about what’s reasonable.” It’s tough to have a rational conversation when your child is surrounded by open cards and a pile of cash and checks. Anticipate that graduation money is coming and talk with your child before they start opening gifts.

Negotiate how to handle the influx of money

One effective approach is to agree that the graduate can splurge with a small chunk of the total, such as a shopping spree with 10 percent of what they receive.

Determine what to do with MOST of what they receive

That cash can help a graduate take their next step, yielding benefits months or even years later. It could buy a laptop for school or put a dent in tuition. It might go toward transportation or an emergency fund. This might be the moment to discuss the difference between an emergency purchase and something that can wait.

Share a small amount

I like to urge graduates to tie their big day to a cause they care about. Sharing 2 to 5 percent can be incredibly meaningful, and it establishes another good lifelong habit.

GOTTA HAVE IT NOW! WOW! National Retail Federation’s Graduation Survey reported that Americans will give more than $4.7 billion in high school and college graduation gifts.

MONEY TALKS: Before you talk with your young person, pull your own thoughts together: What specific expectations do you have for graduation cash?

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