Graduation season is here, and it’s likely you’ve been to (or even hosted) a grad party or two. Whatever your relation to the graduate – parent, grandparent, or close family friend – it’s always a heartwarming moment to watch a young adult finish college. Naturally, it offers us the opportunity to reflect on our own youth, our graduations, and the start of our careers. Grad season reminds us of how far we’ve all come in our journeys.
Post-grad life is a step into the “real” world and while every generation hits the mean streets sooner or later, this year’s grads might face a hard place to launch. High prices, rising interest rates, a shaky job market, and global uncertainty are all working together to make it a difficult atmosphere for new grads to get their footing. More than that, the average public university graduate leaves school with around $33,000 in student loan debt – and often even more.
If starting out financially “underwater” wasn’t enough, many grads will be managing their money on their own for the first time. Suffice to say, it can be an overwhelming financial period in one’s life. While we don’t advise that you barge in and give the grad in your life a real talking-to about all things financial, we do want to offer a few tidbits that you could pass on to a young person entering the world – a little sage advice from financial experts, spoken through a trusted adult on the other side of their career journey.
Here are a few non-overbearing, actually-helpful things you might thoughtfully convey to the younger generation this grad season.
1. Spend with Purpose
When new grads do eventually land that first post-grad job, their eyes are going to pop when payday comes along! But simply having money doesn’t mean they’ll have the tools to manage it well. Encourage them to envision a realistic budget for themselves that covers their essentials, savings goals, and a little fun. It’s a good opportunity to share any zany or useful money-saving tips you found helpful when you were starting out. It’s important to stay financially grounded as you start to build habits for the future.
2. Save Something – Anything – Now
It’s hard to save when you’re just starting out, but the habit matters more than the amount. If you can develop the reflex of taking a part of a paycheck and putting it in a safe account separate from what you spend out of, that can be really helpful! Suggest that your grad set aside even a small amount each month – maybe even $50 – toward an emergency fund. Having a few months of expenses saved can be a real lifeline if they face a job change, a sudden car repair, or a doctor’s visit.
3. Start Investing – Even If It’s Small
One of the best gifts you can give a new grad is an understanding of compound interest. As boring as it sounds, the earlier they start investing, the more their money can grow – even with minimal contributions.
Workplace retirement plans (like a 401(k)) are a great way to get rolling on investments. Encourage them to simply contribute to the level their employer matches, if offered. If not, helping them open a Roth IRA or traditional IRA now could make a huge difference in a few decades. You might even consider a small financial gift to get their first investment account going and pair it with a little note about long-term financial goals.
4. Protect Their Credit (and Their Future)
Credit cards are not typically taught about in school and they are rarely as straightforward as they seem. Remind your grad that money mistakes involving credit can follow them for years. A missed payment here or a maxed-out credit card there may not seem like much but it can hurt their insurance premiums, ability to rent, and even their employment opportunities, depending on the field, to name just a few. Helping them ask the right questions about credit can guide them in the right direction as they work toward a healthy financial future.
Today’s grads are facing real financial challenges in this market, but with a good head on their shoulders and a few smart moves in their back pocket, they’ll be a-okay. They also have time, energy, and curiosity on their side!
As someone nearing retirement, you’ve likely learned many of these lessons firsthand, either from the guidance of a loved one or from mistakes you made along the way. One of the greatest financial gifts you can offer a new graduate isn’t the check in your congratulations card – it’s perspective.
For more financial advice for all-ages, stay connected with Secured Retirement.
