July 18, 2011
Give Your Grad a Hand: 5 ways to help your child post-graduation
The first years after graduation can be stressful on students, but the stress cast on parents is often overlooked. Parents are faced with the ever-growing problem of how to help their kids land on their feet, and effectively start their own lives. While many are tempted to simply pay the student’s way, this is not always the best option for either parents or students. Parents need to start thinking about retirement, and may not be able to afford those extra years of financial support, and students need to learn financial independence. The problem is, what can parents do? Here are some ideas…
1. Teach Financial Literacy
It’s amazing how many students graduate without any idea what a 401K is or how to use a credit card correctly. These are some basic, teachable (and free) steps that can really provide a foundation for recent grads.
- Using basic accounts – Most students have checking/savings accounts well before college, but should still be aware of the basics. Are there minimum balances? What happens if you overdraft? Little tips like these can pay off big in the long run, and prevent avoidable fees while money is tight.
- One thing my parents taught me when I got my first credit card was don’t buy anything that you can’t afford right now. This has been a huge help, and while I may not get everything I want right away, I have never had an outstanding balance on my card. People may think, “well, what’s the point of having one, then?” To this, I would answer, beginners should be exceptionally careful, using the card only for what’s affordable (except, of course, for an emergency). This will help set a good foundation for lifetime credit use and help grads to avoid even more debt.
- How to save – Students hear tons of financial terms thrown about, (ROTH IRAs, 401Ks, Savings Bonds, etc.) but in most cases, have no idea what any of these things are. Sitting down with your grad to talk about different savings/investing options can be a huge benefit in the long term.
2. Stop the Pressure
With the job market at a low point (though better than last year) finding a job is incredibly stressful for many students. It’s important to keep them motivated during their application process, but do not pressure them or force them to take a job they don’t want. This, of course, is easier said than done, with student loan payments looming on the horizon. To help motivate them, think about setting goals or time limits. Knowing that they have only a certain amount of time to find a job can really help speed the process along.
On a side note: Today, more recent grads than ever are living at home after graduation. If this happens, remember that the house rules in high school may no longer apply. Your child is more adult than kid, and many fights can be avoided by bending some of the old rules, and realizing that your grad may be frustrated with answering to parents again. While this may not help with the finances, it will make this stressful time easier on everyone!
3. Keep Them Healthy
Since the Obama Administration’s recent law, grads are able to remain on parents’ health insurance until the age of 26. Saving students from the high cost of health insurance (or accidents sans-insurance!) can help while they begin to get their life in order. If they need insurance, consider: Graduate Student Insurance Plans.
4. Give Them Credit
College graduates are faced with a lot of firsts – first car, first apartment, first student loan payments, and having a solid credit history can help their future. After teaching basic credit card usage, parents can help students and grads attain their first card, which can now happen in 2 ways:
- Co-sign for a card – This provides independence, but with security. Just make sure that if you do co-sign, your child remains on top of payments, and be willing to help out a little should payments falter.
- Obtain a secured credit card – These require an initial deposit, and the amount of the deposit becomes the credit limit. These are great because you cannot spend more than you have, and teaches smart charging! A downside is that it’s more expensive up front, but you may save in the long-term.
5. Teach Them to Cook
Yes, really. Buying takeout every night, besides being unhealthy, can also really impact your child’s wallet. By teaching your grad to cook, they could save a lot of money on expensive take-out once they’re on their own!