It’s exciting to graduate from college, get an apartment and bring home that first real paycheck. Of course, these days, reality sets in awfully quickly. That paycheck may not materialize for a very long time, the “apartment” may be the childhood bedroom, and all that independence – eagerly anticipated by both parents and 20somethings - may take a long time to become reality. You probably discussed budgets when your child left for college. Now, it’s time to do it again.
- Budgets: Unless you want to continue to support your child in the style to which he has become accustomed – which in some cases means luxury on your dime – encourage your child to sit down and map out his monthly expenses, income and some financial goals. Make sure college loan repayment is part of that discussion. About.com's financial planning guide has some handy tools for doing that planning. Need a motivator? Show your child that if he wants to go somewhere wonderful on vacation, he'll need to find that money somewhere, like his weekly dining and entertainment budget. Each $100 he doesn't spend on dinners out and club jaunts is another $100 toward Hawaii, Moab or whatever destination floats his boat.
- Safety Nets: The upside of the current terrible economy is that no one needs the concept of "safety net" explained. Savings are the only protection families have in the face of job cuts and furloughs. So one of your child’s financial goals should be to create his own safety net – enough cash to cover six months of living expenses.
- Credit Cards and Student Loans: Some two-thirds of new college grads will be balancing rent and cable bills with payments on their $22,500 student loan tab, the average debt load college kids carried in 2009. Add on another $4,138 in credit card debt at 18% - not the 6% of a student loan - and you’re talking dangerous levels of debt. Urge your child to include those payments in his budget, and refrain from racking up any more credit card debt. If he can’t afford something in cash, he can’t afford it, period. Credit cards should be used for emergencies and paid off as quickly as possible.
- 401Ks and Other Savings: If your child has found a job, hurray! Now encourage your child to join his company’s 401K plan, especially if his employer matches the contributions, or make use of the company's automatic savings deductions. He sets the amount, the finance department deducts and stashes the cash in a separate account of his choosing. It's much easier to save money if it's not sitting there, temptingly available in a checking account.
