Each year, college students across the country complete their final exams, purchase their caps and gowns, and gear up for summer vacation. Though the break from studying is well deserved, too much fun and excitement can often push financial planning down the priority list.
As a parent, you understand that starting out with a strong financial plan can help you secure a happy retirement future. Therefore, before your children walk across the stage to accept his diploma, you’ll want to ensure he understands the basics of financial planning and management.
Here are five tips to help your son or daughter prepare for a better financial future!
5 Financial Tips for College Graduates
1.) Establish Good Credit
Your son or daughter may already own a credit card, and if so, you want to make sure your child uses it correctly. Spending too much, or making minimum monthly payments, can lead to financial debt and bad credit. This will affect your child’s ability to obtain employment after graduation or borrow money in the future.
Therefore, it’s important that college graduates understand their credit history and how to maintain a strong credit score. We recommend that parents get their children accustomed to checking their scores regularly.
- Did you know that you can request a free copy of your credit score from Equifax®, Experian®, and TransUnion®? Visit AnnualCreditReport.com to request an annual report or call 1-877-322-8228.
- We also recommend that parents have their children consider freezing their three credit reports if they are not applying for a lease, vehicle, or job that would require a credit check. Of course, they can always unfreeze their reports, if needed. This is a free service and ensures that no one, other than your child, is able to apply for a loan in his or her name.
2.) Repay Student Loans
For many students, it’s easy to forget about school loans during the first four years of college. After all, they have finals, internships, and GPAs to occupy their minds.
Nevertheless, your child will need to repay these loans eventually. Most lenders offer flexible repayment plans, but depending on your son or daughter’s job situation (remember, they will be entry level), your child may find refinancing or loan consolidation a better solution to lower monthly payments and reduce interest rates.
For parents, this means your children can pay off their loans faster and put more of their hard-earned money in their 401ks.
3.) Maintain a Monthly Budget
No one likes to hear the word budget, especially recent college graduates. However, maintaining a monthly spending plan that records where their money is going will allow graduates to manage their personal finances and spending habits.
In fact, there are numerous mobile apps available—including Mint, YNAB, and Wally—that track spending activity across multiple accounts to make budgeting fast and easy!
4.) Save for the Unexpected
Aside from learning remotely, hopefully, your child also learned about the importance of having a savings account, especially in 2020. If your college student does not have a personal savings account, now is the time to open one.
Most independent financial planners recommend that a savings account cover at least 3-6 months of living expenses. This will allow your son or daughter to be prepared in case of an emergency and give you peace of mind after your child leaves the nest.
5.) Talk to a Financial Planner for College Graduates
It’s understandable that your college graduate may not be interested in financial planning services, especially at such a young age. However, having access to professional guidance will help your child make better investments for the future. It’s never too early to get your children thinking about financial management or consider having an independent financial advisor review their finances.
At Focus Financial, our experienced team of advisors offer invaluable resources, tools, and guidance to help you and your family make smart decisions about future financial planning.
To get started, find a financial planning advisor near you to schedule a consultation.