Cutter Family Finances: Our Kids Need To Know How To Handle Finances

Jeffrey CutterRichard Maclone Photography - Jeffrey Cutter

It is getting to be that time of year again when millions of parents are getting ready to send their babies off to college. But before they fly the coop and spread their wings, there is one more important thing we as parents need to teach them—money management.

According to the National Financial Educators Council (NFEC), which gave a nationwide financial literacy test to youths ages 15 to 18, even after 13 years of education, it seems many of our high school graduates are heading off to college without money management skills.

Unfortunately, money management typically is not a subject kids are taught in school, so many teenagers find themselves lacking those financial survival skills. In fact, according to the NFEC, the average score on the financial literacy test mentioned above was just 60 percent. In the academic world, that is a D! This does not bode well for our children’s financial futures, considering that the financial decisions these young folks make in college can be with them for years to come. Therefore we, as parents, need to have discussions with our children to help shape their financial decision-making processes to make sure they are starting off on the right financial foot.


As a parent of three girls, I plan to educate my daughters in four important areas of finance before they head off to college. Last week I was on a television show to discuss those same strategies. Let me share with you, Cutter Family Finance readers, what I shared with the television viewers. 

First and foremost, we must teach our children to budget. A budget is the backbone of a solid financial plan. It is the foundation for financial success. Simply teaching the skills needed to keep a budget will serve college students throughout their lives. Young folks must learn how to track their income from part-time work, allowances, and especially student loans. They must also learn how to identify their expenses, including fixed expenses like rent, and variable expenses like food, entertainment and gas. A budget worksheet is a great place to start.  You can download one at

Secondly, our children must understand how to effectively use both a checking account and a savings account. If they do not have both, consider having your children open them before heading off to college. A savings account will put them on the right path for the future, even if they can only put a couple dollars away here or there. A checking account is important and should be treated as their operating account for their monthly bills. 

Explain to your children that once monthly expenses are budgeted, they should deposit just enough into their checking account to cover those monthly expenses.  The rest should be deposited into their savings account.

Once the money in the checking account is gone, it’s gone. Budgeting and spending go hand in hand. But we must also remind our kids to keep track of how much money they have in their account so they don’t get hit with fees for bouncing a check or over-drafting.

It is also extremely important to teach our kids about how to use credit cards.  The use of credit cards is an exciting step toward true financial independence, but credit cards can cause major problems if they are not used carefully. When you and your child are choosing that first credit card, don’t just pick the company that offers a free T-shirt. Study the fine print before signing up. Look for things such as a low interest rate (APR), an extended grace period, low penalty fees and a card with no annual fee. Also, teach your kids to keep track of the payment date so they don’t get hit with a late payment penalty or have their credit score dinged.  Most important, teach fiscal responsibility. Credit cards do not give away free money, and the decisions these kids make in spending can impact them for years to come. (Heck, if we teach them well enough about fiscal responsibility, maybe they will run for Congress. We need them!) 

Last on our list of important financial lessons is how to deal with student loans. While our kids normally do not need to make payments until after graduation, starting to pay off student loans while still in school will help them in the long run. Even if they don’t make full payments while they are in school, suggest they pay off the interest that accrues, if possible. In addition to saving money, this will help establish a relationship with the student loan provider and it, again, reinforces good financial discipline, thereby creating sound financial habits.  

Cutter Family Finance readers, conversations like these do not change lives, decisions do.  Today, let’s decide to teach our youth to learn the building blocks of making sound financial decisions. 

Jeffrey Cutter, CPA, PFS is the managing partner from Cutter Financial Group, LLC ( which provides private wealth and investment management through low risk, low volatility successful strategies because you don’t have to lose in order to gain.  He can be reached at

Investment advice is offered by Horter Investment Management, LLC, a Registered Investment Adviser. Insurance and annuity products are sold separately through Cutter Financial Group, LLC. Securities transactions for Horter Investment Management clients are placed through Pershing Advisor Solutions, Trust Company of America, Jefferson National Monument Advisor, Fidelity, Security Benefit Life, FC Stone, and Wells Fargo Bank, N.A

This column sponsored by:

Cutter Financial Group, LLC, a family owned and operated company, was founded by retirement and investment specialists. We engage high quality, independent wealth managers who specialize in significantly reducing risk during times of volatility, while capturing a large majority of the gains of the upside. This strategy allows our clients to secure a better, and worry-free, retirement.

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