Best Graduation Gift EVER!

It’s graduation season.  Some high school grads are heading off to college, some are heading to apprenticeship programs and the work force, and others are looking forward to a “gap” period. Some college grads have landed with a job, others are still looking (for a job, for themselves…), and some are taking a “gap” period. Regardless of where the grad in your life is heading, more than any other gift you can give, the gift of financial literacy is going to be the one that lasts for their lifetime.

A recent Real Estate Witch survey found that graduating college students expect to make over $100,000/year in their first job after graduation (I made $17,840 if memory serves…).  The reality is that the average starting salary is about half that. Another study found that the majority of graduating students were unable to translate an offered salary into a usable take-home pay (despite the proliferation of online calculators). Even if one were to land that $100k job, building a cash flow based on that amount would quickly be unworkable when the first paycheck finally arrives.  The reality is that these kids come by their lack of literacy honestly. If we won’t teach it, how will they learn it?

Many, many families will talk about nearly ANYTHING else to avoid talking about the logistics of money. Even families in fiscal trouble are reluctant to discuss the scope of the issue.  Two-thirds of American adults can’t pass a basic financial literacy test and we’re tied for 14th in the world for the percentage of adults who are financially literate (although, given the math skills of some politicians, that would make us #1…). One of the very few benefits of the pandemic was a number of states putting financial literacy back into their schools’ curriculum. Seven states now require a stand-alone financial literacy course before graduation (New York isn’t on that list) and five more have passed legislation to make it a requirement in the next couple of years (nope, New York isn’t on that one either).

Unfortunately, this poses two problems.  The first is that we are essentially writing off several generations when we teach our high schoolers money skills. Sure, that generation and the generations that follow will have somewhat better money skills, but their parents, aunts, uncles, and grandparents don’t and won’t. This is becoming an increasing problem for the cash flow of our younger generations as they try to help out the level above them. Second, there is some really solid data that illustrates how our relationship with money develops by the time we are about 9 years old so having a class in high school is already up against a decade of embedded money shadows. While I whole-heartedly support any efforts to get financial literacy into the school system, I think it is something that needs to be handled both in the home and in the schools.

And that’s where graduation gifts come in. If you have a grad in your life, consider giving them the gift of a series of financial conversations – you and them on a walk-to-talk about money; you and them at the kitchen table building a budget; you and them talking about savings versus spending. Ironically, some of the best experiences I’ve had from my divorce work (which can be soul crushing on a good day) are hearing about how parents have used the disaster of divorce to open the door to talking about money and building a family cash flow plan where everyone is involved. When I hear that, I feel much better about their long-term financial success.