It’s the time of year when college students all over the country are walking across the stage, receiving their degrees in front of their friends, families, and loved ones. This moment of recognition represents the culmination of hard work and effort. Next comes their first steps into the real world.
Your child (and you) may be wondering how to set themselves up for financial independence. Here are some tips to help guide your recent college graduate:
Student Loans – Have a Plan
Putting a plan in place to pay off student loans can be overwhelming. Each year, 30 to 40 percent of undergraduate students take on federal student loans, and roughly 70 percent of students who receive a bachelor’s degree have education debt by the time they graduate. If your child has student loans, it’s important to help them map out a plan that works best for them. Setting up recurring monthly payments is a great way to help them stay on schedule. After determining how much they owe, make sure the monthly payment amount is sustainable when considering other financial obligations they may have.
Teach Them How to Budget
For the first time in their lives, most recent college graduates have a steady flow of income. According to Yahoo! Finance, the average starting salary of recent college graduates is $55,000 a year. Looking for their first place to live and determining how much to spend on rent while ensuring they still have enough to live on will be new to them.
A common practice to help young adults budget is the 50/30/20 rule:
- 50% – essentials (rent, groceries, bills)
- 30% – leisure (going out to eat, vacations)
- 20% – savings (401(K), emergency fund)
Build a Credit Score
There are many positives to building credit in the early stages of adulthood. A first job enables your children to begin to build a credit history, which can be important for the future, such as obtaining a mortgage when they want to buy their first house. Once they have their first job, it may be a good time to apply for a credit card. There are a variety of different credit cards, depending on their needs or preferences, such as those that provide airline or other rewards. Impress upon them the importance of paying off their full statement balance each period in order to avoid high interest rates and maintain a good credit score.
Schedule an Appointment with a Financial Advisor
Introduce your child to a financial advisor so they will have a resource they feel comfortable with for objective guidance and answers to financial questions they may have. Starting out with the right financial plan and advice is often the key to building a sustainable future — for the rest of their lives.
For additional tips on how to help your recent college graduate become financially independent, reach out to an advisor at SageSpring Wealth Partners. We’re here to help answer your questions so that you and your loved ones can feel financially confident.
