If you have been giving your child an allowance, this exercise for college will be similar. If you started working with your child on cash flow management when they got their first job, this experience will be slightly different.

Here are some guidelines for creating an environment where your child can learn and thrive financially.

If this is the first time your child has managed money, this may be your last opportunity to teach them as much as possible about managing cash flow—that is, money coming in and going out. Once they are on their own and living independently, it’s a little too late.

Your Lectures Don’t Matter

You can be both a huge and tiny influence on your child’s financial education.

Let me explain.

On the one hand, your kids as teenagers still have some respect for who you are in their lives, even if they don’t show it. They will listen to you.

However, be clear: They are taking what you say with a grain of salt. They believe they have all the answers and are ready to separate from your oversight. While developmentally appropriate, it can be frustrating.

What I want you to remember is that you really have no idea what they are absorbing and are ready to implement. They have their own brains. They have their own needs and wants. They have their own opinions.

The best thing you can do? Let the consequences do the teaching.

Think back to any lectures your parents gave you as a kid. Now think about how much of those lectures you actually absorbed at the time.

You might appreciate those lectures now as an adult, but in most cases, you didn’t as a kid. You weren’t being disrespectful or dismissive; you just didn’t have the context to make sense of it.

Stop lecturing.

The best thing you can do for your kids is give them enough room to make mistakes. They will learn from direct experience.

You want them to make mistakes when the stakes are low. It’s one thing to make a $30 mistake or a $300 mistake. It’s a much bigger deal to make a $30,000 or $300,000 mistake as an adult.

Let them screw up now, not when the consequences could be severe.

Create the Spending Plan

Chances are pretty good that you will be covering the “big” expenses for college—tuition, room, board, books, travel to and from school, a computer, and any other major items.

What remains is ancillary spending: extra meals (pizza!), entertainment, parties (beer, friends, more beer!), snacks, laundry, and miscellaneous supplies.

I recommend creating a spending plan for this ancillary spending. Decide how much it should be, even if that amount is initially arbitrary, and determine how often money will be transferred to cover those expenses.

For example, consider a college freshman living in the dorms and on the meal plan, with tuition fees and books paid, and the dorm room set up. The student might need some additional items to get through the semester that weren’t anticipated when moving in. Go ahead and pay for those things.

After that, your student might only need $40 a week, for instance, to cover other expenses. Pick an amount.

In most cases, you and your student likely have accounts at the same bank. Set up an automatic transfer for $40 a week on the same day each week from your account to theirs.

This is the easy part.

The Hard Part: Say Nothing, Do Nothing

Now, let the chips fall where they may.

Students are often shocked to discover just how much their lives cost. Chances are, you’ve been covering nearly all of their expenses up until they left for college.

Now they’re getting a real-life experience of what things cost. This is a good thing. They need to start paying attention to prices, understanding sales tax, and recognizing the impact of their spending. This is an excellent education.

Give Them More Money?

Almost inevitably, your student will call at some point and say, “I need more money.”

At this moment, I highly recommend you approach the situation with curiosity, compassion, and confidence, rather than judgment or shaming.

Simply ask, “What do you need the money for?”

If it sounds like a legitimate school expense, find a way to pay for it directly. If it’s not, and they have simply run out of their $40 weekly allowance, your response should encourage growth, framed with compassion and confidence.

You might say something like, “I’m sorry that you’ve run out of money. I know how frustrating it can be when I run out of spending money for the week. I trust that you’ll figure it out. I know you can do it.”

I strongly advise against negotiating—at least not yet. You can offer to send next week’s money early but remind them that no additional funds will be provided.

Let them figure it out. They may whine, cry, or share a sob story about how important it is to have this money, but you should respond with curiosity, compassion, and confidence in their ability to manage.

This experience might even motivate them to get a summer job so they have more spending money next year, which wouldn’t be a bad idea.

Additionally, I encourage parents/caregivers not to slip extra money into their student’s pockets during visits. When was the last time someone did that for you in the real world? Set the tone now: Do you want a financially responsible adult, or do you want a child who keeps coming home for a handout?

When to Negotiate

If the “I need more money” call happens every week, it might be time to revisit the spending plan. Perhaps the allowance is too low. However, before adjusting the amount, make sure your student has documented every expenditure they’ve made with their $40 allowance, and review it together.

Do not judge their spending choices. You might see more pizza, beer, or movie tickets than you’d prefer, but that’s okay. It’s their money, and they can spend it as they wish.

If the list includes necessities like toiletries, this could be a sign that you need to consider increasing their allowance.

Otherwise, hold off until the end of the semester or the following school year to revisit the spending plan.

Borrowing: Just Say No

This is not the time to teach your children to borrow money to meet living expenses. Ideally, they should have the cash on hand to buy what they need. Learning to delay gratification is an important skill to develop.

Credit Cards: Yes, With Rules

When my children, who were in high school at the time, opened their own checking accounts, the bank didn’t ask “if” they wanted a credit card; they asked “when.” I was shocked. The days of providing a secured credit card to help students build credit are gone.

Be prepared: credit card companies hand out credit cards to students as soon as they walk onto campus, often with little to no education provided.

I don’t have an issue with students having credit cards. They can help build credit history and offer educational value.

The key is to take the time to teach them. Make sure they understand what a billing cycle is and how interest works. Strongly encourage them to make one or two purchases on the card per month and pay off the balance in full each month. Ideally, they should have a credit card that allows them to easily make payments from their bank account.

Some advisors recommend paying off a credit card balance weekly or biweekly as a good financial habit, which can be beneficial at the start.

Late Fees and Penalties: The Student Pays Those

As I mentioned earlier, let the consequences do the teaching. If students accumulate late fees or penalties on any account, make them pay those fees themselves. It’s painful, but they will learn through experience.

When was the last time someone paid your late fees, penalties, or parking tickets? Again, let the consequences teach the lesson.

Leaving College With a Great Start to Cash Flow Management

The best thing your child can leave college with, aside from their degree, is the experience of managing cash flow—their “school of hard knocks” degree.

If they can learn to live within their means and delay gratification before they land their first job, they’re already on the path to financial success. There will be more to learn about saving for retirement and investing, but managing cash flow is the essential first step.

We all want our kids to be successful and happy. Since money touches every part of our lives, helping them develop a healthy relationship with money and spending is a major step toward lifelong financial happiness.

If you’re seeking guidance on how to create a financial environment where your child can thrive, or if you have questions, don’t hesitate to reach out to us at Lanning Financial. We’re here to support you and your family through every stage of this important journey.