Guiding New Graduates to Financial Success
Recent college grads are on the loose and building their new work wardrobes for their first job. Are you a proud father and grandfather? In addition to celebrating parties and gifts with them, now is the time to give them the gift of financial independence as well. As they start their first jobs, you may be wondering, “Is my child ready for the financial responsibility that comes with a full-time job and living on their own?” From the beginning, he wants them to develop savings priorities and healthy spending habits. Here are some tips to help point them in the right direction:
Explain the importance of saving.
As young adults begin to receive a paycheck, they may be tempted to spend their funds far more on “wants” than “needs.” You can help by reminding them of the difference between the two and by sharing the importance of saving. Whether it’s saving for unexpected expenses and emergencies or eventually buying a car or home, encourage your young adult to set aside a set amount from each paycheck. You can also tell them to check with their employer and see if they can direct the savings portion of their paycheck directly into a savings account and only the rest goes into their checking account for spending.
Emphasize retirement contributions
Recent graduates hardly think about retirement. They have just entered the workforce – why should they think about an event that will impact them more than 40 years from now? With rent, bills, and other responsibilities, your young adult may choose not to contribute to retirement right after school. We all know this is a mistake! This is your chance to emphasize how a long retirement time horizon can benefit you financially. Educate them on compounding savings growth and encourage them to talk to their employer about any career guidance that is offered. Emphasize that they have one of the greatest assets working for them at this age: time.
Teach them to follow a budget
Budgeting allows young adults to create a spending plan with their money. It’s a great way to keep track of your spending and see if you have enough to spend on the things you really enjoy. Making a budget can keep your young adult focused on their money goals and avoid unnecessary financial problems. If they feel overwhelmed, share how you learned to live within your paycheck and show them that today there are apps and online tools they can use; These are just some examples.
Show them how to pay bills on time.
As an independent adult, your child will quickly have to take on many responsibilities. Perhaps this includes regularly paying a variety of bills (rent, cell phone, etc.). Keeping track of when bills are due can become cumbersome for those just starting out. Show your child that it’s crucial to stay on top of bills and pay them on time. Late payments and fees, and any outstanding interest on balances, will deplete your disposable income, leaving you with less money to spend on entertainment and fun. There are many apps and computer programs to help set up reminders and automatic payments. Help your young adult look at the options and share any systems you use to manage monthly payments.
Help them build credit
Many college graduates have not yet had the opportunity to establish a credit history. Educate them on how a credit score can affect their future. A good credit score can influence your ability to get auto loans and mortgages approved. Your credit score can also affect the interest rates on these loans: A good credit score can lead to lower interest rates. Some employers use a credit check in their hiring process. Some insurance companies also use credit scores as part of their underwriting process, since a person’s credit can predict insurance claims. To help your young adult build his credit score, encourage him to pay bills on time, avoid taking on too much debt on any one open credit card, limit the number of credit cards he uses, and keep his oldest credit card open.
Now that your graduate degree has officially launched, use some of your time together to pass on good financial habits. Whether it’s dedicating a portion of each paycheck to saving or using an app to track spending, these tips can help your young adult stay on top of their finances and develop good money habits that can last a lifetime. lifetime.