Who-hoo, or as my friend Martha says, “Wooty-hoo!” She’s very Southern.

Why am I celebrating with such reckless abandon? My daughter just graduated with a doctoral degree in pharmacy!!!   She has a job. She’s moving out. I get a pay raise (in theory, at least).

Now to be a little less glib and a little more serious, it is a great milestone in both our lives. My son graduated with a bachelor’s degree in mechanical engineering last December as well. I am so pleased they have chosen two great career paths with job possibilities all over the country (world?). The third little nestling has been out on her own for some time working as a nursing aide while going through an RN program; her husband has a new job as an electrician and he is very excited about it.

Thirty years or so of blood, sweat and tears (not the old R&R band, but I did listen to “And When I Die” more than a few times through the years…as well as “You Make Me So Very Happy”). What a long strange trip it has been, and pardon me if I stop at this waypoint to enjoy the scenery.

These successes in my children’s lives give me such a great feeling. Many of you have graduates too, I’m sure. High school, college, and post graduates are in all my newsletters and Facebook communications. There’s even a kindergarten announcement or two as well. I hope you are enjoying a celebration, too.

For those of you who are looking down the road towards post-secondary education, you’re probably asking how, on earth, are you going to pay for it. To quote one more old tune from my youth: “It ain’t easy.”

I, like many, struggled with the question of where to put my savings dollars in my kids’ early childhood.   It is hard to know what the priority was between saving for retirement, paying the mortgage, or funding future education.   There is no clear general answer to this, but I will offer some guidelines that may be of help.

First, let’s not assume everyone needs a four-year college degree to “get ahead.”   The traditional trades are an excellent career path for many and now they are open to both genders as opposed to the expected gender roles of the 20th century. The country is facing a shortage of welders, plumbers, electricians and a/c technicians. It’s hard work and necessitates one having disability insurance in case physical health issues dictate a short working life. Two years at a junior college with some business courses wouldn’t hurt either.

But as to the question of what to pay first, and how to allocate those savings dollars in our early working years…I am a big proponent of paying yourself first. Obviously this isn’t absolutely literal, the government needs to get their taxes off the top or they will put you in the pokey. And if charitable giving isn’t high on the list it has a way of dropping off entirely.   That said, however, I have always encouraged my kids to save 10% of every dollar they receive from work, gifts or windfalls from the sky.   I think the first place to put these dollars is your 401(k) at work or in an IRA.   Next up for me was some college savings; in Florida we have the state-sponsored Florida Prepaid College Program. I bought it for all three of my kids and it was a great choice for us. It was not enough, however. The living expense of kids away at college was a drain on the mythical “discretionary income” for about a decade. A child to Pharmacy School for a doctorate (that’s eight total years of college) was an expense I did not foresee.   Graduate school was expensive…try $22,000 a year (+/-) in tuition on for size. Ouch.

And then the third choice for me was to pay the mortgage. This meant a couple of things to me: it meant I bought less rather than more house initially, it meant deferring car purchases, house renovations and other large outlays; it meant smaller vacations; and so on. We made lots of mistakes. We disagreed as a family on choices along the way.   But today we have arrived.   It’s a nice view.

Much like opportunity cost, budgeting is another concept that comes up quite naturally during the day. The easiest example with kids is teaching them to budget their time. The easiest way is to backwards plan regarding leaving for a trip. Have them name all the little events and tasks that need to take place before you can leave: making the bed, changing clothes, eating breakfast, feeding the pets, brushing teeth, brushing hair, bringing a book or gadget, putting on shoes, etc. I will ask, “How long does it take you to put on your shoes? Correction: How long does it take you from the time I tell you to put on shoes to the time you actually do it?” Because, that’s two different values, right? We add up all the times and subtract it from the time we need to be in the car and on our way. This is essentially budgeting. Have the kids budget their time.

When it comes to including the condition of money, we have already heard of great tools out there like the Give, Save, Live piggy banks. This is a great and proven way to help a child understand budgeting. These banks emphasize in emphasize the importance of naming every dollar as soon as you get it. This teaches your kids the simple concept that “You have to know where your money is going”. Otherwise, it will leave and you won’t know where it went! And when you don’t know where it went, often you have overspent. Naming and knowing the destination of your money makes money your servant rather than the other way around.

For example, if my daughter receives $20 total from birthday cards (even if it’s given through gift cards), I’ll sit down with her and scratch on a piece of paper where each dollar may go. The 5 minute conversation ends with her saying she’d like to give $2, save $2 and spend $16. She has effectively planned or laid out a budget by naming every dollar and we did it very soon after receiving the money. These conversations go a long way to taking the mystery out of money for your children.  Next, we put this piece of paper into a folder and simply label it “BUDGET”.  You may even use Excel or Access or Quickbooks.  The lesson is quite simply the importance of writing it down.  AND you create a record that can be reviewed.  I believe it is equally important for my child to be able to tell me where there money went as it is to decide where it should go in the first place.

Planning is at the heart of creating breathing room: spending less than your income.