May has finally arrived, and that means the college graduation season is about to begin. Very shortly thousands and thousands of ecstatic graduates will throw their caps in the air and march out into a life of freedom and happiness – at least that is the hope. If you are the parent of a soon-to-be graduate you want nothing but the best for your now adult child. Great jobs, success, and money – of course your child deserves it all. Before your student moves on, though, here are some essential financial planning tips he or she will need to help make the other dreams come true:
• Get a student loan plan in place now: Talk to your graduate as soon as possible about student loan repayment expectations, particularly if you are not planning on shouldering the entire load. Sit down together and list out all of the federal and private student loans that you and your student borrowed over the last four years. Estimate the monthly payment amounts and determine who will be responsible for each payment. If the monthly payments look too high, you will need to get an alternative plan in place now. Think about loan consolidation or have your student investigate the available income-based repayment plans. Don’t wait until the payment due notices start arriving as that could be too late to get any alternative plans into place.
• Start living on a budget now: Some college graduates believe that living on a budget is only for students, and don’t realize that it is a life-long skill. Give your graduate the benefit of your life-long wisdom and show him or her how to develop a budget that will allow for real-world living expenses. Explain how to use credit wisely to acquire well-planned purchases. If your student/graduate learns to budget properly, it should be possible to pay off those student loans while still living a reasonably comfortable life.
• Learn to save now: There is no better time than the present to learn how to save money. Don’t get out of college and jump right into the credit trap. Since graduates can benefit from the substantial amount of time they have on their side, they can afford to save small amounts for long periods of time. Think about putting small amounts of money away with every paycheck for a car and even for retirement. If a new home is down the road, look into the FHLBanks’ Affordable Housing Program (AHP) which offers money-saving alternatives and may even provide substantial grants to bolster personal savings amounts.
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