While one of our clients stopped by to visit the other day, she talked about her son’s upcoming college graduation.
“What he really needs,” she said, “is money boot-camp, so he understands how money works once he’s in the real world and paying his own bills.”
We agree absolutely.
Graduating from the bank of Mom and Dad can mean a rough but long overdue awakening for many kids.
That’s why we work with many young adults (my own kids included) to help them learn the ABCs of budgets, Roth IRAs, tax withholding, renter’s insurance, and other essential personal finance “must-knows.”
If your kids are ready to transition to the real world, you might find some helpful pointers in Geoff Williams’ Must-Know Money Tips for New Grads in U.S. News & World Report.
Here’s a few of Geoff’s top tips:
Start saving for the future right away. The sooner you start, the less you need to save. Plus, right now you don’t have all the family, mortgage and other expenses you’ll accumulate down the road. Here’s something to blow your mind. Some new grads might even have more disposable income now than they’ll ever have again (scary thought, huh?).
Be ultra-cautious about over-spending and piling on credit card debt. That impulse purchase may not seem so expensive but the credit card bill will stick with you long after your new gadget is broken or has totally lost its appeal.
Put it on autopilot. Saving is easy if you make it automatic. Go online to set up a monthly transfer from your bank account to your emergency fund or Roth IRA. It’s free and helps make saving painless. Don’t have an emergency fund or Roth IRA? They should be items #1 and #2 in your handy new grad tool kit.
Track it. It’s easy to overspend if you don’t know what you make or what you spend. Get a handle on what goes in and out. There’s plenty of free apps to help you do that millennial-style if you’re not a pencil and paper type of person.
Think total package. Evaluating a new job? Look at the benefits, cost of living, commuting expenses and hidden perks to make the best decision. Don’t forget that your take-home pay will be less than your top line salary. Taxes (federal, state and even local, depending on where you live), medical insurance and other deductions will shrink the total package and reduce what’s left for you to spend.