How Money Savvy is your recent College Graduate?
June is the month of Graduation parties, High School and College. My son is a new High School Graduate and while at a party for one of his friends, I ran into his friend’s older brother and his friend who both just graduated from the University of Illinois. I have known these boys for many years as our families are friends and the kids attended the same parochial grade school.
As I chatted with the new College graduates, they were happy but also sad to be done with college. The reality of graduating means they now have daily work, have to live with roommates (their parents) that are not as fun and beer is more expensive! I was very pleased to see that they realized the financial sense of living at home for a while even if it wasn’t the exact lifestyle they want at 22.
Coincidentally, these two boys also attended a class that I taught about personal finance when they were in 8th Grade. The class is created by Money Savvy Generation™ but I facilitated teaching it at their school. They attended the class called Money Savvy U™. They were my very first class of teens! We discussed budgeting, saving, spending, and donating, and investing. What an honor that I now get to see them as young adults entering the working world and thinking about making wise money choices.
So what would I suggest to them now if I had them in a class?? These are not novel ideas, but the more young adults hear them, the more likely they might absorb the message.
- Save at least 12% of what you make (20% is better) – This sounds like a lot. But you just got out of school. You are used to making nothing! Start right away and you won’t even know it is missing.
- Save in your 401k at work as well as an account you can access without penalty. At some point, you will need money for a rent deposit, home purchase or other big need. Do not have everything in an account you cannot access. Generally, I like 12% in the 401k and 8% in the accessible account if you have the ability.
- First place to Live? Figure out what you have available for housing after factoring your savings and other living needs (including taxes). If you can’t save at the above levels, you can’t afford it.
- Live below your means. Most of my clients who have accumulated wealth have done so through consistent saving and discipline. They have not purchased every new toy available. Slow and steady really does win the race.
- Spend on things that bring you value. What would you rather have: a great vacation or dinner out 3 times a week? Either one is fine based on your desires but spending without purpose won’t get you the things you value.
So good luck my Money Savvy Kids – You know who you are!
Please Share this with a recent college graduate that you know (or his/her parent).
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes. Money Savvy Generation and Money Savvy U are separate from LPL Financial.