How To Prepare Grads for Financial Success

Preparing Graduates To Handle Their Finances

One of the best gifts parents and guardians can give graduates is sound financial advice. Together with practical tools and examples of how money management works in the real world, family and friends have the opportunity to set high school and college students up for a strong financial foundation.

Whether they take the trade school route or go to a four-year college, both choices offer the possibility of a lucrative career. As grads enter the workforce, developing financial literacy is essential for their long-term financial health.

Talking with grads about handling money is an effective way to help them avoid debt and prepare for life beyond high school or college.

Key Financial Topics To Discuss with Grads

Talking with grads about these important ideas can help them start their financial lives with better habits. With practical steps for managing money and a basic understanding of effective financial tools, adults new to the workforce can maximize their income and savings.

Consider discussing these ideas with the graduate in your life:

Budgeting and Expenses

To manage their money well, grads need to know where it goes. Consider guiding your graduate to set up a basic budget that tracks spending on essential living expenses.

Likely expenses for recent graduates include:

• Rent
• Utilities (including cell phone and internet)
• Food
• Transportation (car payment and gas)
• Insurance
• Entertainment and Incidentals (subscriptions, clothing, etc.)

Grads can use an app to help organize their budget or go with a digital spreadsheet. Whichever method they choose, encourage your grad to update their budget monthly based on their paychecks and bills.

Though it may seem obvious, emphasize that smart money management means their expenses should never exceed their income except in an emergency situation.

Credit Cards and High-Interest Debt

Another crucial topic for adults new to managing their own finances is the use of credit. Some grads make the mistake of thinking credit cards are just like a loan. Believing they can charge up to their credit limit and just pay it off casually, reality hits hard when that first statement comes back.

It’s important for new graduates to understand that whatever they fail to pay in full on their balance becomes high-interest debt. You may want to point out that most credit cards charge over 20% in interest, making it nearly impossible to catch up on payments without a drastic change in income or excessive spending cuts.

Credit utilization is also a key idea for new grads to know. As their credit limit grows, it doesn’t mean their spending should follow. Encourage graduates to only charge what’s necessary, keeping their total credit use much lower than their total available credit.

Emergency and Retirement Savings

Grads should know it’s never too early to start saving for retirement. As soon as they begin earning income, graduates can set aside funds in a retirement account.

Another important savings account to start after graduation is an emergency fund. Funneling extra cash into this type of account at an early age helps grads avoid debt from unexpected expenses. That way, when the car breaks down or there’s an injury, they aren’t straining their income.

Talk with your graduate about automated savings. These programs help you stay consistent and make it easier to include saving as part of a budget. Deduct a specific amount from each paycheck to quickly build this fund.

Credit Scores and History

A surprising number of young consumers monitor their credit. However, they may not know what to do with the data.

Since grads won’t have much of a credit score after just striking out on their own, it’s more important that they understand why it matters. They need to know when credit scores become relevant, such as purchasing a house or applying for a personal loan.

Credit scores may not impact graduates immediately as they start their financial independence, but it’s never too soon to build a strong foundation. Encourage graduates to start early with habits to build credit, such as:

• Making timely payments
• Paying bills in full
• Keeping charges well under their credit limit (credit utilization)

Student Loan Management

Help graduates understand debt. Student loans are something that can burden them for decades, so speak with grads to strategize how they’ll pay off their education once they graduate from college.

All federal student loan borrowers take exit counseling when they graduate or leave school. This is a 30-minute online course provided by the Federal Student Aid office. Talk with your grad after this session and help them plan their initial and continued payments.

Key Financial Terms Checklist

Here's a list of talking points to strengthen your grad's financial literacy:

6 Practical Steps To Help Grads Succeed Financially

After talking about financial management, try taking these action steps to help grads get a strong financial start:

1. Set Up a Budget Together
   Use a budgeting app with customizable categories and alerts that track spending. It’s possible to link multiple people to a specific budget, so you can check in on your grad if they want the advice.
2. Guide Them Through Their Benefits
   Once your grad accepts their first job (or even before they make the decision), review the company’s benefits package for programs like employer match for retirement plans. Assist your grad in determining which health insurance plan and 401(k) package works best for their lifestyle and income.
3. Gift Grads an Investment
   Giving high school grads funds in a 529 plan can cover many college expenses, such as books and tuition. You can also match contributions to a regular or Roth IRA to start a retirement nest egg for high school or college grads.
4. Assist with Automated Banking
   Help grads set up autopay for key accounts like student loans and savings. Ask your graduate to strategize how much they want to put aside for automated savings based on their income.
5. Make Yourself Available
   Grads may not know what they don’t know until they’re out on their own. Offer monthly meetups over coffee or a meal to review their finances and let them know you’re happy to chat when they have questions.
6. Connect Grads with a Financial Advisor
   If your grad isn’t ready to discuss personal finance with family members or you just don’t feel like you have all the answers, connecting them with a financial advisor is a great option. These experts assist with financial planning that’s personalized and informative.

More Financial Tips for Grads

Here are a few additional topics to discuss with graduates as they begin their own financial journey:

Consider the Cost of Living

Once graduates start life outside of school, they’ll need to think about the cost of basic expenses. These essential items are the foundation for a budget and can’t be skipped. However, you can tell grads about ways to save money and make cost-effective choices.

Sure, getting a place of their own would be great, but if having a roommate saves your grad a lot of money, it may be worth it. Or maybe they need to wait another year or two for that new car. Show them how to shop for things like auto insurance and cell phone plans as another way to cut costs.

Make Long-Term Money Goals

Since a grad’s biggest asset is time, it’s important they plan for their financial future. Investments can be intimidating, but even putting a small amount towards a portfolio can make a huge difference by the time they retire.

Here are a few examples:

• I want to build a portfolio with three different stocks by the time I’m 25.
• I’ll put 2% of my salary every year toward retirement in an employer matching program.
• I plan to save $10,000 towards a down payment for my first house in the next four years.
• I’ll open a health savings account (HSA) with my employer to save $100 per paycheck for medical expenses.

Maintain an Inexpensive Lifestyle

Some consumers start to spend more once they start making more, justifying purchases with the larger paycheck. This “lifestyle creep” can hinder emergency and retirement savings because income mostly goes toward paying off large credit card balances.

Talk with grads about when to splurge and when to cut back, including living well within their means to put more money into savings. Encourage your grad to save the extra cash for important purchases such as a big vacation or a new piece of furniture.

Prepare Graduates for Financial Success

Sharing monetary advice is a practical way to help graduates achieve a good credit score, build effective financial habits, and manage student loan payments. Learning how to make better financial decisions at an early age sets them up for a better future.

Before they flip the tassel, it’s worth the hassle of having an honest discussion about how to spend, save, and budget. This is one of the best gifts you can give to the graduate in your life.

Show Grads How To Tackle Debt with TurboDebt®

If the grad in your life gets stuck in a cycle of debt, it may be time to recommend debt relief from experts like the team at TurboDebt®. We help consumers with overwhelming credit card debt, personal loans, and some student loans. The TurboDebt team offers accredited services to assist consumers stuck with huge debt balances.

With over 20,000 positive reviews across Trustpilot and Google, we’ve proven ourselves as a trustworthy partner for debt relief. Our customized plans help you pay off debt faster for less than what you owe.

Contact the team at TurboDebt today to start your free consultation!