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Your clients deserve a gold star: they made it though their child’s high school years! Of course, even if they’ve saved well for the next four years, their (almost) adult kids are likely to need some financial guidance, and chances are that the very last people they want to hear it from are Mom and Dad.
With high school graduation just around the corner, now is the perfect time to act as a trusted advisor to the whole family by sharing your own words of financial wisdom. By giving them tools to take control of their money even before they head off to the freshmen dorms, you can help them take the first steps toward smart financial planning to be sure their finances are in great shape when their next graduation day rolls around. Tuck these five tips into the perfect graduation card and you’re likely to make Mom and Dad happy, and help send their new undergrad off (and out) on the right foot:
Take control of your financial aid.
It might be tempting to hand off this task to your parents, but remember that your financial aid will determine your own debt after college, so taking the reins now is a great first step to becoming a money-smart adult. If you’re receiving financial aid from your new university, be sure you know exactly how much you’ll be receiving and when, and that all the details are in order before you arrive. Also, be sure you’re clear on any conditions associated with maintaining financial aid, such as your GPA or course load. The last thing you want is a surprise tuition bill because you didn’t withdraw from a tough class on time or you let your units drop below the minimum.
Understand your student loans.
Student loan debt is a huge issue for today’s college graduates. The average Class of 2016 graduate has $37,172 in student loan debt, and the average monthly loan payment after graduation is $350. That’s a pretty big chunk of any new grad’s paycheck! To keep your loan balance as low as possible, only borrow as much as you need to pay uncovered expenses. Keep in mind that if your loans are unsubsidized, they accrue interest while you’re in school, even though you’re not required to make payments until after you graduate. If you’re not entirely strapped for cash, consider paying the interest each month to avoid paying even more than planned down the road.
Set—and stick to—a budget.
This may be the first time in your life you’ve been responsible for your own cash flow, and the last thing you want is to realize you’re broke with two weeks left before new funds are headed your way. If you’re receiving your aid or loans in a lump sum payment at the beginning of the year, planning your spending carefully is even more critical. To start, write down all of your income, including a schedule of when you will receive how much. Next, write down every expense. Be sure you have enough cash coming in to pay for everything you’re responsible for. If you live off campus, that can mean everything from rent to cable bills to the occasional night out. Even if you’re on campus and on a meal plan, understand how much you can spend each week to avoid hitting a zero balance before the term is over. Money surprises are never good surprises!
Be smart about using credit.
This is a great time to start building your credit history, but only if you use credit wisely. Your goal is to build a great credit score to support your financial needs later on, so be sure you don’t damage your credit early on. Yes, get a credit card in your name, but treat every purchase on your card like cash. If you can’t afford it, don’t buy it! To build your credit score, use your card for small, recurring purchases like your cell phone or cable bill, and pay the balance in full each month. If you find yourself starting to rack up a balance, put the brakes on fast: set your card aside to use for emergencies only, and pay off that balance as soon as you possibly can.
Save whenever you can.
Few college students find themselves swimming in extra cash, but there are ways to start saving even when you’re scrimping to make ends meet. Working while in college—on campus or off—can be a great way to earn extra money, meet new people, learn new skills, and even de-stress from academics. If you can squeeze in a part-time job, figure out how much of your paycheck you can save. Start by building an emergency fund to cover things like a flat tire or a cash flow shortage. Once that’s in place, consider starting a small investment account. You’ll be amazed at how quickly funds can add up with just a little effort!
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Disclosure: The information and opinions herein are for general information use only. The opinions reflect those of the writers but not necessarily those of New York Life Investment Management LLC (NYLIM). NYLIM does not guarantee their accuracy or completeness, nor does New York Life Investment Management LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice and are not intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice.