College seniors will begin graduating in a few weeks, and parents should be having conversations with their children regarding financial independence, if they haven’t already, says Avis Hinkson, dean of Barnard College in Manhattan.
How much will parents continue to support the graduate financially? “If you say at the outset, ‘I’m going to help you for six months,’ they can explain why they need a year. But the conversation needs to be had,” Hinkson says.
Hinkson suggests the following areas for parents to consider:
- If parents have been making car payments or paying car insurance, will they continue? Will they contribute toward purchasing a car?
- What are the situations under which you might loan the child money for unexpected expenses such as a car repair?
- If the child has had access to Mom or Dad’s credit card, will that continue? Who will pay that bill? Have a conversation about the danger of credit card debt. “I think we assume kids know some of these things,” Hinkson says.
- If the student is moving home, will he or she pay rent? How much? At what intervals? Will the graduate contribute toward food? How long is he or she welcome to stay?
- If the child is working a full-time job, discuss putting away an emergency fund.
- Discuss budgeting and financial goals. Do they want to save to buy a condo, for instance? For a vacation? For enough money to move out of your home?
- Recent graduates may think, “Why should I make a contribution to a 401(k)? I’m not making a lot of money and retirement is so far away.” But explain how important it is to start retirement savings early.
- Consider making a graduation present of an hourlong meeting with a financial planner. Books by financial writers such as Suze Orman could also be a great gift, Hinkson says. “I think it would really be appreciated in the long run,” she says.