Hey Taylor – My son just finished his first semester of college and landed a winter break internship. He’ll earn around $5,000, and I want to help him manage this money responsibly while still enjoying his earnings. What are the three most crucial areas to focus on, and how can we approach them effectively? – Marcus

Hey Marcus – That’s fantastic news about your son’s internship! This presents a valuable opportunity to instill sound financial habits. While $5,000 might seem like a substantial sum, effectively managing it requires a structured approach. Let’s focus on three key areas:

–1. Building a Realistic Budget: This isn’t about restricting him, but about showing him where his money goes. Help him categorize spending into needs (rent, food, books), wants (going out, games, etc.), and savings. Lots of free budgeting apps can make this easy, or you could just use a spreadsheet. The aim is to be aware of his spending, not to eliminate fun stuff. Talk through choices – if he wants that new game, how can he adjust other spending to make it work while still saving some? This teaches him to prioritize.

–2. High-Yield Savings: Once he’s budgeting, encourage a high-yield savings account. These accounts pay better interest than regular accounts, so his money may grow faster. Set up automatic transfers from his checking account; even small regular amounts add up, and the automatic transfer makes saving a habit. Explain that this isn’t just for emergencies; it’s for future goals – maybe a down payment on a car, or contributing to his next semester’s tuition.

–3. Mindful Spending: It’s important he enjoys some of his earnings, but let’s make it thoughtful. Talk about the difference between needs and wants, and about opportunity cost – what he gives up by choosing one thing over another. Sometimes an experience (a concert, a trip) is more worthwhile than another gadget. Help him set a weekly or monthly “fun money” amount. This helps him manage his wants within a budget, learning responsible spending within a framework of enjoyment.

This isn’t about strict rules, but about guiding him to make smart choices. It’s a great opportunity to build good habits! Thanks for reaching out!

TAYLOR J KOVAR
CHIEF EXECUTIVE OFFICER
CERTIFIED FINANCIAL PLANNER™