Finances
Risa Nye
Money can be a tricky topic to raise with a newly-minted college graduate but there are few subjects more important. If you haven’t had “the talk” about budgets, saving and financial planning before graduation day, you’ll want to bring it up soon.
Where do you start? In the car or plane on the way home after the festivities are over and the dorm room is packed up? Sure, you’ll have a captive audience, but it’s probably best to pick a less fraught moment.
There’s an app for that
Prepare for the conversation by doing some homework of your own. Of course, there’s an app for that — any number can help your grad make a spending plan, track expenses, keep their finances in the black, and start good habits where spending and saving are concerned. Check out a few of the available options: Mint, Budgt, Toshl Finance, iXpenseIt and Buxfer. You’ll see how easily these apps create a spending plan (sounds so much better than “budget,” but it’s the same thing), and track where the money from that (fingers crossed) first job of theirs will go. The graphics are clear, and will help anyone see the big picture.
Save, invest, insure
Let’s say your grad has lined up a job already. Celebrate first, and then test the waters for how much information they feel comfortable sharing with you about insurance plans, 401Ks or IRAs. It hardly seems fair to start talking about retirement to young people with brand-new diplomas, but no one regrets starting this kind of planning early. It’s important for them to understand the compensation and benefits package before they sign on the dotted line. Time is on their side. All the early contributions and investments the new grads make will add up over the years — it’s the power of compounding growth.
While we certainly hope our new grads march off into a future bright with promise, we also want them to be prepared for the unpredictable: this includes maintaining renters’ insurance, health insurance and auto insurance. We also want them to be wary of stocking up on those credit cards that are dangled temptingly in front of them, both on and off campus. Do they know they will be establishing a credit history? This kind of history can influence the future, so make sure your grad knows where to go to periodically check on this: www.annualcreditreport.com.
You never know — your recent graduate may surprise you with their financial acumen, so give them a chance to demonstrate their handle on these matters before you jump in. To their credit, my grown kids are much savvier about planning for the future than I ever was! They’re saving for retirement, and for college for their kids — and so the cycle continues.
Is it too soon for them to consult with a financial advisor who has their long-term interests in mind? Probably not, especially if there are student loans to pay off or consolidate.
Share your own successful strategies
Many moneyexperts recommend sharingwhat you feel is appropriateabout your own finances, retirement plans and estate documents. This could be a good teachable moment for how to make decisions about money and investments: when to purchase a big-ticket item, when and why to wait, and what kind of considerations go into making these decisions. If your college grad is interested in getting some real-world experience, invite them to participate in the discussion as you weigh the pros and cons. You may find you’re relieved to have them in the know about how these things work in your family. If you have a budgeting system that works for you, break it down and share it.
Even when you find a good time to talk, when you think your grad will be receptive, realize that your good advice may not sink in immediately. Be patient. Some lessons take a while to learn.
Finally, when the nest is empty, and the fledglings are on their own financially, think about how to shift your focus away from paying tuition...and toward your own retirement!
With thanks to Nancy Tredwell and colleagues at Bedell Frazier Investment Counselling LLC. Looking for more great financial tips? Read — and share — Judy' McNary's "Advice on saving for new college graduates."
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Risa Nye
Read more by Risa Nye
Risa Nye is a California native. Her books, articles and essays can be found at www.risanye.com. She co-edited the anthology Writin’ on Empty: Parents Reveal the Upside, Downside, and Everything in Between When Children Leave the Nest. Her Ms. Barstool column and other articles appear in Berkeleyside.com. She also writes for EatDrinkFilms.com. After returning to graduate school in 2009, she earned an MFA in Creative Writing. Her memoir, There Was a Fire Here (SheWritesPress), was published in 2016. She lives in Oakland, CA with her husband.
FAQs
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What are the financial advice after graduating college? ›
It indicates that 50% of your earnings should go toward your necessities, 30% toward your wants, and 20% toward your savings. By using this budgeting technique, you'll be able to cover your monthly expenses, splurge reasonably, and save for the future.
How much money should you have when you graduate? ›
If your savings are currently a bit anemic, aim for enough money to cover three to six months of expenses. To put a number to that goal, add up all your regular expenses and multiply the total by at least three. Hopefully, you'll never need to dip into those funds, but if you do, they'll be waiting for you.
What should I do with my graduation money? ›
25 Smart Things To Do With Your Graduation Money
- Jump-Starting an Emergency Fund. ...
- Paying Off Credit Card Debt. ...
- Buying Interview Clothes. ...
- Reducing Your Student Loan Debt. ...
- Saving up for an Apartment. ...
- Investing in Mutual Funds. ...
- Opening a High-Interest Savings Account. ...
- Getting a Start on Retirement Saving.
The 40/40/20 rule comes in during the saving phase of his wealth creation formula. Cardone says that from your gross income, 40% should be set aside for taxes, 40% should be saved, and you should live off of the remaining 20%.
How to budget $4,000 a month? ›
For example, say your monthly take-home pay is $4,000. Applying the 50/30/20 rule would give you a budget of: 50% for mandatory expenses = $2,000 (0.50 X 4,000 = $2,000) 30% for wants and discretionary spending = $1,200 (0.30 X 4,000 = $1,200)
How much money does the average person have after graduating college? ›
Average salary by education level
| Education level | Median weekly earnings | Median annual salary |
|---|
| Doctoral degree | $2,083 | $108,316 |
| Professional degree | $2,080 | $108,160 |
| Master's degree | $1,661 | $86,372 |
| Bachelor's degree | $1,432 | $74,464 |
4 more rowsSep 11, 2023
According to the College Board, students who graduated with a bachelor's degree in 2022 had an average student loan debt of $29,400.
How much money should a college graduate have saved? ›
Ideally, new graduates should work to create an emergency savings account with at least three to six months' worth of living expenses, but even an extra $200 or so can be a good place to start. The last 30% of your budget can go toward spending on nonessential expenses like travel, eating out and shopping.
Is $500 a good graduation gift? ›
Some families and family friends may choose to spend closer to $100 - $500, depending on their finances and the needs of the graduate. It is important to take into account what the graduate is planning to do after graduation and whether they truly need money.
Another sobering finding is that over 60 percent of employed student respondents said that they always live “paycheck to paycheck.” That number climbs to 74 percent of working students with dependent children.
How much does the average college student have in their bank account? ›
Average savings by education level
| Education | Median bank account balance | Mean bank account balance |
|---|
| No high school diploma | $900 | $9,130 |
| High school diploma | $3,030 | $23,380 |
| Some college | $5,200 | $33,410 |
| Bachelor's degree | $23,370 | $116,010 |
Feb 29, 2024
When it comes to high school graduation gifts, it's best to keep things modest. A good range to consider is: $20 - $50: For acquaintances or distant relatives. $50 - $100: For close friends and immediate family members.
Is $75 a good graduation gift? ›
If you decide to gift cash, here are suggested amounts: Acquaintances $10 – $25. Friends $25 – $50. Close friends and family $75 – $100.
Is $1 000 a good graduation gift? ›
According to this piece, financial planners say the gift should be equal to approximately one month's rent or mortgage payment, somewhere around $1,000. The article said parents should give their children between $1,000 and $5,000 when they graduate from college.
Is the 50 30 20 rule a good idea? ›
The 50/30/20 rule can be a good budgeting method for some, but it may not work for your unique monthly expenses. Depending on your income and where you live, earmarking 50% of your income for your needs may not be enough.
Does the 50 30 20 rule still work? ›
Customize according to your situation
For many people, the 50/30/20 rule works extremely well—it provides significant room in your budget for discretionary spending while setting aside income to pay down debt and save. But the exact breakdown between “needs,” “wants” and savings may not be ideal for everyone.
What is the disadvantage of the 50 30 20 rule? ›
Drawbacks of the 50/30/20 rule: Lacks detail. May not help individuals isolate specific areas of overspending. Doesn't fit everyone's needs, particularly those with aggressive savings or debt-repayment goals.
What is one negative thing about the 50 30 20 rule of budgeting? ›
It may not work for everyone. Depending on your income and expenses, the 50/30/20 rule may not be realistic for your individual financial situation. You may need to allocate a higher percentage to necessities or a lower percentage to wants in order to make ends meet. It doesn't account for irregular expenses.
