MARK RIEPE: I'm Mark Riepe. I head up the Schwab Center for Financial Research and this is Financial Decoder, an original podcast from Charles Schwab. It's a show about financial decision making and the cognitive and emotional biases that can cloud our judgment.
As I record this, it's June and for a bunch of us, that means graduations. Newly minted college grads will soon be roaming the land. It's a big achievement. If you have a graduate in your life or you're a new graduate yourself, congratulations. It's certainly not a given. In 2025, the graduation rates at four-year colleges and universities was 53.5%. If one of your kids is a college grad, with luck, they'll earn a paycheck soon. And because you're listening to this podcast, it's a good bet you pay attention to financial topics. So you've probably talked to your son or daughter about money before, but it may have been a more theoretical discussion. Now that they have a better job and a bigger payday, things just got real. And in this episode, we're here to help you and your child talk about real world finances.
We had a chance to talk with Patrick Means. He's fantastic. He's got some great insights. Patrick is a vice president and branch manager here at Schwab. He's been helping clients with financial planning and investing guidance for more than 20 years. He's been on the show before and we'll get to his thoughts on what to do with these children who are all grown up and starting a new chapter in their life. In the first part, we'll focus on how to give financial advice to your college graduate and have it land well. In the second part, we'll focus on some of the relevant decision-making biases that get in the way for younger adults.
To properly set your expectations, we're not really giving much financial advice in this episode. Instead, it's about how to give advice so that your knowledge doesn't land on deaf ears or the only feedback you get is some eye rolling. Also, we'll assume that you're talking to your son or daughter, but you can apply it to any young adult relative or family friend who wants financial advice. So let's jump in.
Now, some of you may be reluctant to give advice because you feel like you need to be financial experts to help your kids. That couldn't be farther from the truth. You don't need to be a financial professional at all. The important thing is that you care. And even if you don't have a lot of expertise, this can be an opportunity for you and your child to learn together.
PATRICK MEANS: Playing an active role starts with having the conversation. I understand sometimes these conversations are not always easiest because we don't feel like we're a subject matter expert. We don't want to look like we don't have our stuff together. But at the end of the day, our children really do want to engage with us. Timing and how and tone do matter. But having the conversation is the first step.
MARK: We all know that there's a time and place for everything and this conversation is not any different. Is it best to bring the issue up spontaneously or maybe you'd rather schedule it?
PATRICK: I respect and really enjoy when I see parents have the, maybe the holiday time, just the let's get together. And during this celebration of whatever, right, we're going to all talk about goals and we're going to have some dedicated time to just hear you celebrate you, but then talk about how we can support you in the near-term and in long-term.
MARK: The ideal scenario is for your kid to start asking lots of questions and demonstrating that they're open to input and are interested in what you have to say. If they don't ask, then it becomes more challenging. Nobody likes unsolicited advice. Giving advice at the wrong time can backfire. It can be dismissed or even resented.
PATRICK: Unsolicited directives to their child where the tone is I'm the parent and you're the child. you know, that is effective when your child is eight years old, right? Not as effective when they're an emerging adult.
So what I've seen to be incredibly effective is showing excitement about their specific passions and goals, not necessarily your own, and then asking them how you can support them to get to the goals that they just defined they're excited about.
MARK: A key aspect of being an adult is you have more autonomy. It's literally built into our legal system where when you reach certain ages, you can legally do things that you couldn't do before. As an advice giver, you need to respect that autonomy. Don't give controlling advice. Instead, offer your guidance as suggestions with rationales. Don't pummel them with directives. It helps to think of your role as shifting to that of a consultant. You're providing support as needed, but you're not controlling your kids' decisions.
And it's hard to shift that mindset. For example, I just said you're not controlling your kid's decision. But the reality is that they're not kids any longer. And that's why that phrase emerging adult is so important. The good news is that if you suggest sound financial practices and explain the rationale well, your son or daughter will be more open and cooperative. They will feel that you support their independence, which is critical. Avoid saying things like, "you must." Instead, offer choices and rationales. Examples from your own life are good too, as long as you're careful.
PATRICK: Here's the mistake. And I've made this one before. Parents say, here's what works and here's how I did it. This is the way it should be. That I've seen not be as effective as it could be. Potential better approach asking, "So, tell me what you've learned about money or investing. What lessons have you taken over the last couple of years while in school? What worked well? What would you have done differently?" And by asking the questions, you're really getting a chance to see how they think about money and investing, but also again, it opens the door as opposed to "this is the way," it's "have you considered it in this aspect?" Or "I really liked that approach. I think you should keep doing that."
MARK: Let me wrap up this segment with a grab bag of tips we found. Number one, remember to tell your child that it's their right to make the final call. You can say things like, it's your decision, I have some thoughts if you're interested, but I trust you. Number two, be polite, don't lecture, respect your son or daughter's competence. For example, you can use phrases like, "have you thought about," or "one idea might be."
Number three, you may also want to ask questions first. If your kid feels like you understand their situation, they'll be more receptive to your advice. That way, your suggestions will align with their goals and won't feel like a lecture. In other words, tailor what you say to the situation. Make sure it's relevant and constructive. That's where asking them to make a plan before you talk could be helpful. Number four, don't gloss over downsides and challenges. This makes your advice more credible.
Number five, realize your kid might not put your great advice into practice immediately. It may take some time and that's okay. Keep the lines of communication open for more conversations and follow up questions.
PATRICK: Step one, listen. Step two, ask questions and listen more. Step three, tie your advice back to what you learn from your child and what's important to them in step one and two.
MARK: You know, we like to talk about biases on this podcast. So here are some we all fall prey to, but they're some of the ones that are most relevant for new graduates. The big one is procrastination, which technically isn't a bias, but it's closely related to present bias. Present bias is when we are considering two future moments. We tend to give more importance to the one that happens sooner. This is especially relevant for emerging adults. One of the most important things you can do is to get them to think farther down the road.
Make sure that they understand that decisions they make now will affect the future version of themselves. This is probably a good place to use some examples from your own life where you made a poor decision because you were too focused on the present and not enough on the future. You can then turn that around and give an example of where you made a sacrifice that paid big dividends down the road.
Another bias related to procrastination is the status quo bias. It's the bias that makes us want to stay in our current relaxed state of mind, maintain the status quo. We're hardwired to avoid things that make us change our mindset or think about or learn something new. Problem is, investing can be complicated with a lot of steps that takes time and effort, especially if you're a new investor. It's a veritable petri dish where the status quo bias can flourish. One suggestion here is to make sure that the emerging adult in your life understands that the status quo is gone. They are an adult and have accountability for their life in a way they didn't have before.
Plans need to be drawn up and decisions need to be made. Their world has changed and they need to adapt. That's a bit over dramatic, but the need is real. One way to make it easier is to break the decisions and tasks into smaller chunks and deal with them a few at a time.
Another bias to be aware of is the overconfidence bias. And we've been to that bias before. An April 2026 study from FINRA looked at overconfidence in younger investors. It found that 60% of investors aged 18 to 34 use social media as a significant resource. 61% of those younger investors made an investment decision based on a recommendation from a social media personality or finfluencer. That in and of itself could be okay, but the study found that this group rated their own subjective knowledge of their investing as high. Then they scored low on investment knowledge tests compared to those who didn't follow finfluencers.
That disconnect is what overconfidence looks like. The social media users were also more vulnerable to fraud. If your new grad uses social media to learn about investing, that could be okay. But it also could be a problem if it's the only source.
One bias that in my opinion is underappreciated is the exponential growth bias. This is the one where we underestimate the power of compounding to grow our investment. We also underestimate how much compounding increases certain kinds of debt like credit card debt.
I think this bias is a little tricky right now. As a parent, your experience as an emerging adult was different from your kids. Back in the day, you had to wait for things and that upbringing shapes your attitude toward investing. You accept that a financial plan takes time. It's a lifelong effort. Your kids grew up in a faster paced world. They had smartphones and Uber and streaming and DoorDash. They experience more instant gratification than you did. They may expect their financial life to follow suit.
PATRICK: A wise parent will also see that their child has to no fault on their own grown up in a world where everything is instant. They didn't have to go into the yellow pages to call for a taxi to wait 30 minutes. They didn't have to go to the blockbuster in the center of town and hope that their movie was there on a Friday night.
And so, we shouldn't be surprised that when it comes to investing, they would naturally think that, well, I should make money on my money instant because everything else in my life is instant. When I want to take a vehicle, when I want to watch a movie, when I want to eat, doesn't take a lot of time. And so I think if we can understand that perspective and meet them where they're at, then we're able to better transition to the conversation to say hey, you know, there's a lot of power in patience.
MARK: As we all know, talk is cheap and while it's great to have these conversations, how do we know that we're getting through or that the conversation will result in some sort of meaningful action? Patrick has some advice on what success looks like at this stage. He proposes three action items that set a young adult up for success.
PATRICK: Hands down three things that I think it'd be important for parents to define a success would be one, can my adult child have a budget? Two, can they save a portion of their income? And then three, once they start saving, can they invest some of that? Because long-term that's going to help them. If they could have competency in those three, you're truly setting them up for success for the long-term. Because those are things even as adults, we are still wrestling and trying to figure out.
MARK: The last step is to make sure you get all of this down in writing. Patrick explains why.
PATRICK: Every situation is different and what parents want to do and what they don't want to do, what the financial responsibility would be for the parent and what it might be for their child. Whatever is agreed upon should be put in writing so that everyone is clear around what the expectations are. So for example, if mom and dad say, hey, so to help you get started for saving after school, we're open to you coming back home and living here, right, so that you don't have to pay rent and you can have a roof over your head. We benefit cause we like having you around, we love to see you. With that, here though, is what we're hoping you might do is the money that you would have spent on rent. You're saving a portion of that. And here's why that's important for you. You will be able to potentially have a down payment for your own house, or you will be able to start investing into your 401(k) sooner.
So communicating in that way, and that give and take for whatever it is ,and compromise, it puts it at what the clear expectations are, what the benefit is for both parties. And then we come back to an agreement and we write it down. So it's transparent upon what we agreed upon.
MARK: Plans are great and we emphasize repeatedly the importance of creating plans. However, we all know that life doesn't go according to plan. Sometimes things work out better than planned, but not always. If that happens, you may need to intervene and Patrick has some ideas about when to step in and help.
PATRICK: We also know as parents, just because we've been on the earth longer, there are some mistakes or decisions that we make that have greater consequences that are very difficult to repair. And so we don't want that to happen either in those scenarios where I've been asked about, well, what does that intervening look like? The advice I give is first for parent to acknowledge to their son or daughter that they're going to love and respect them whatever mistakes, decisions they make or do not make. I think it's important to lead with that.
But then you have to also be direct and say, so, hey, we've let you do it your way and it's just not working. And so, you know what? I'm going to step in and intervene because what we don't want to do is make a decision or make a mistake that's not repairable.
MARK: This episode has been chock full of ideas and advice to help you launch your new graduate. Patrick has some important parting thoughts on letting go and giving your kid the freedom to live their life while still being supportive.
PATRICK: I think as parents, we have to remind ourselves the most important thing that we want is for our children to be their own independent, sufficient people. Like for me, and for many parents I talk to, that's what brings them joy, that I've been able to bring this person into the world, and that at some point in the future, right, they're doing their own thing. And so if I don't allow them that space, to do that, to make those critical decisions, sometimes to make mistakes, to have their original thought, then I'm ultimately minimizing the very thing that I set out to do, which was for them to be independent, responsible, good people.
MARK: On that note, that's it for this episode of Financial Decoder. Thanks for listening and thanks to Patrick Means for all his terrific insights. We hope you got some tips and strategies you'll use to help your daughter or son launch into the world.
If you'd like to learn more, you and the new college graduate in your life can go to SchwabMoneyWise.com. Schwab Moneywise covers all the basics of investing in finance, including goals and budgeting, debt and investing. There's a ton of information on the website, plus tools and resources like budget planners and quizzes. Be sure to check out Schwab's Teen Investor accounts for younger kids too. There's helpful information there as well. We'll have some links to both of those in the show notes.
If you'd like to hear more from me in the meantime, you can follow me on my LinkedIn page or at X @MarkRiepe. That's M-A-R-K-R-I-E-P-E. As always, we'd appreciate it if you'd give us a rating or review on Apple podcasts, or comment on the show. If you listen to it on Spotify or tell a friend or a few friends about us, we always like new listeners. So if you know someone who might like the show, let them know that they can follow us for free on their favorite podcasting app.
For important disclosures, see the show notes and Schwab.com/FinancialDecoder.