Now that your college senior is safely tucked in back at school, it is not too soon to start planning post-graduation. Let’s start with the graduation gift.
WHAT TO GIVE YOUR GRADUATE: The Gift of the Future
- Twenty-two year olds have a hard time (impossible is more accurate) imagining being old. Let alone how fast it will happen. Saving for retirement is simply not a priority for them. So, it is our job to get them started, even if against their will. Consider opening a Roth IRA as your graduation gift to your child. The miracle of compound interest is dependent on time—the sooner you get started, the more miraculous it is.
- Start looking at mutual fund companies for initial deposit requirements—can be as low as $50, but more commonly around $1000. Can’t save $1000 by next May? Talk to family and friends who might be planning on a graduation gift and pool your resources.
- Picking a fund can be paralyzing. Gratefully, many companies are offering target date funds. Easy peasy. Just calculate the young person’s retirement year and it’s done! (Don’t worry, it isn’t set in stone. Your graduate can make changes as they wish.)
- If opening a Roth IRA for your graduate isn’t affordable, consider helping them sign up for their employer-based retirement fund. It is far too easy to not sign up. Don’t let up on them until it’s done! This may not feel like a gift to your graduate, but 40 years from now they will be thanking you! Bake a celebratory cake when it is all set up.
- The employer doesn’t offer retirement savings? Still no excuse! Welcome to myRA! This new federal program is designed to help those without employer-based retirement savings to open up a Roth IRA with Direct Deposit through their payroll. Savings are risk-free, backed by United States Treasury. Visit myra.gov to learn more.
Next is living arrangements…
WHERE TO LIVE: It Isn’t Free Anywhere!
- The other post-graduation concern is living arrangements. Most graduates end up back home by default. Set up the expectation that post-college they will be paying rent. Don’t spring it on them when they are at the door, start talking about it now. This also helps set up the expectation of immediate job search.
- It may feel wrong to take money from your child, especially if you don’t need the money yourself to pay bills. But, remember, preparing our children for the real world of bills and financial responsibility is our responsibility.
- Some parents will set aside rental income to gift to their child at a later time like a deposit on a future apartment or a contribution their Roth IRA, etc. Consider using the rental income to catch up on your own retirement savings, which has likely taken a back seat while raising children.
- Along with rent, expect (and the hard part—enforce) that your graduate do their share of household work. Knowing how to operate appliances and lawn/garden equipment, or how to use tools, is a HUGE benefit.
We know how fast time flies by. We were fighting back the tears as they got on that school bus for the first time in kindergarten just a few years ago, weren’t we? You will be fighting back those tears again in no time as they walk up to accept their college diploma. Be ready to prepare them for their entry into real-deal adulthood.
Author Mary Ellen Kaluza is a Certified Financial Counselor at LSS Financial Counseling. Counselors like Mary Ellen are able to meet with you either in-person or by phone and discuss your options with debt. We also have counselor specialized to talk about student loan issues and housing. We are here for you. Appointments are free and completely confidential. Give us a call today at 888.577.2227.