This month, millions of college graduates will exit the stage with diplomas in hand to embark on careers and, for some, financial independence. If you have a child or grandchild who is transitioning into this next phase of life, here are some tips that can help you assist them:
START THE CONVERSATION: Graduation offers a timely opportunity to discuss the importance of building a solid financial foundation, good savings and investing. Talk to your graduate about financial habits that can last a lifetime, such as:
- Creating—and sticking to—a budget.
- Setting up auto-pay for regular bills.
- Record-keeping (tracking apartment deposits, tax receipts, etc.).
- Utilizing budgeting apps, bank account notifications and other online tools.
- Building good credit.
ENCOURAGE INVESTING: The majority of this year’s college graduates represent the last of the Millennials (generally, those born 1980–1995). A study from Deloitte shows Millennials tend to be risk averse when it comes to financial behaviors and attitudes toward investing, with less than 30% of their wealth in the stock market. Meanwhile, Americans are living longer, with an average of 20 healthy years after age 60. The looming threat to Social Security from prolonged lifespans and diminished reserves would suggest that new grads should exercise their time advantage and get into the market. According to BankRate.com only 18% of 18- to 25-year-olds invest in the stock market. So, how do you urge a 20-something to put aside income for an outcome as far off as retirement? Lack of financial preparedness, coupled with an increasingly strained safety net, is one reason to encourage new grads to get into the market sooner than later.
And if you plan on giving a gift to a new graduate, make sure you are gifting strategically. Read our article on ways you can best do this.
We hope these tips help you assist your graduate during this phase of their life. If you’d like to discuss this information or revisit your plan, please give us a call.