New college graduates are free and building new wardrobes for their first jobs. Are you a proud parent and grandparent? Right from the start, you want them to prioritize savings and healthy spending.
Explain the importance of savings
When young adults start getting paid, it can be tempting for them to spend their funds much more on “wants” rather than “needs.” You can help them by reminding them of the difference between the two and sharing the importance of savings. Whether it’s saving for unexpected expenses and emergencies, or eventually buying a car or home, encourage your young adult to set aside a certain amount each paycheck. You can also tell them to check with their employer to see if they can direct the savings portion of their paycheck directly into a savings account, with only the rest going into their checking account for spending.
Emphasize pension contributions
New graduates hardly think about retirement. They have just entered the workforce – why should they think about an event that will affect them over 40 years from now? With rent, bills and other responsibilities, your young adult may decide not to contribute to their retirement right after school. We all know it’s a mistake! This is your chance to highlight how a long retirement horizon can benefit them financially. Educate them about compounding savings growth and encourage them to talk to their employer about any professional advice offered. Emphasize to them that at this age one of the biggest advantages is working for them: time.
Teach them to stick to a budget
Budgeting allows young adults to create a spending plan with their money. It’s a great way for them to track their spending and see if they have enough to spend on the things they really enjoy. A budget can keep your young adult focused on their financial goals and avoid unnecessary financial hassles. If they get overwhelmed, share how you’ve learned to live within your paycheck and show them that there are apps and online tools they can use today—here are just a few examples.
Show them how to pay their bills on time
As an independent adult, your child will quickly have to take on a lot of responsibility. Perhaps this includes paying various bills (rent, cell phone, etc.) on a regular basis. Keeping track of when bills are due can be cumbersome for those just starting out. Show your child the importance of keeping track of bills and paying them on time. Late payments and fees—and any unpaid interest on balances—will drain their disposable income, leaving them with less money for fun and entertainment. There are many apps and computer programs that help set up reminders and automatic payments. Help your young adult look at options and share any systems you use to manage monthly payments.
Help them build their credit
Many college graduates have not yet had a chance to build a credit history. A good credit score can affect their ability to get car loans and mortgages. Their credit score can also affect the interest rates of these loans: A good credit score can lead to lower interest rates. Some employers use a credit check when hiring. Some insurance companies also use credit scores as part of their underwriting process because a person’s credit can be a predictor of insurance claims. To help your young adult build their credit score, encourage them to pay their bills on time, avoid accumulating too much debt on any open credit card, limit the number of credit cards they use, and keep their oldest credit card open.
Now that your grad is officially underway, use some of your time together to pass on good financial habits. finances and develop good money habits that can last a lifetime.
Tutorial Video
As an independent adult, your child will quickly have to take on a lot of responsibility. Perhaps this includes paying various bills (rent, cell phone, etc.) on a regular basis. Keeping track of when bills are due can be cumbersome for those just starting out. Show your child the importance of keeping track of bills and paying them on time. Late payments and fees—and any unpaid interest on balances—will drain their disposable income, leaving them with less money for fun and entertainment. There are many apps and computer programs that help set up reminders and automatic payments. Help your young adult look at options and share any systems you use to manage monthly payments.