If your student is graduating from college this December, chances are she can do any or all of the following well: write a compelling thesis; make calculus look as easy as 1,2,3; explain in detail photosynthesis of cyanobacteria; or review 500 years' worth of women in Latin American literature over coffee. But according to recent research by Western Union, your student is no expert (yet) in handling her finances.
Half of all members of the Millennial Generation (anyone born between the mid-70s - early 2000s) feel increased stress about their finances, 35 percent have borrowed money from friends or family members, and nearly 30 percent report difficulty in managing their spending.
As parents, we can help our students with the transition out of college and into their next chapter of life by discussing finances with them. Aside from teaching them lessons you've made, consider the following three tips to bulk up your student's financial competency:
- Budget. Sit down with your student and help her lay out all of her upcoming expenses and income. If she already has a job lined up for after graduation, discuss the 401k or retirement plan, and explain the benefits of contributing to the plan. Student debt might also be a new responsibility for your student. While it's tempting to pay the lowest amount - especially if the loan interest is low - encourage your student to pay off all debt as soon as possible. Also, by limiting new purchases - like a new car or furniture for an apartment - your student will be able to start saving early and learn to live within her means.
- Make moving back home an option. College graduation presents many life changes, and finding a new place to live might not be one your student is prepared to make. In the interim between leaving college and settling into a job, living at home could provide your student with a sense of stability, comfort and security that she needs. Encourage your student to save the money she's not spending on rent, which can go toward a security deposit or down payment in the future. Setting a timeframe for your student living at home will give her an end date to work toward, and may make the transition on the family easier.
- Talk about finances soon and often. Discuss expectations, worries and hopes - both yours and your student's. How does your student feel about finding a job? Will you offer any financial support while your student looks for a job? If your student moves in, what are the expectations as far as chores, paying for food or rent, or a curfew? As with most coming-of-age life lessons, your student will need your encouragement most - even more than financial help or advice.