COLLEGE GRADUATION season is upon us. How about a gift that will really mean something to a student in your life? The way I see it, the best graduation gift isn’t just a check in an envelope – it’s coming up with a few great, memorable ideas to help a new grad make a great financial start in life.
At a time when money skills for young adults have never been more important, consider the following:
Buy them a session – or more – with a money coach. If you already work with a qualified financial planner or professional tax preparer, why not pay for a session or two for your favored new grad to help them work out their first budget as a working adult?
Take the time to talk with the professional about specific financial issues the grad will need to address as well as their first, formal budget setup if they’ve never budgeted before.
Help them get a start on their retirement savings. Again, most of these gift ideas can come from one person or a group throwing in cash contributions. Consider taking the new grad out to open either a Roth IRA or a traditional IRA. Early retirement investing is one of the most important lessons any new college grad can learn.
Check their 529 savings-plan status. If they’re continuing school, you could create a 529 plan or contribute to an existing one. Many new college graduates return to school to start a master’s degree or other advanced training. If such an idea makes sense for your finances, consider opening or contributing to a 529 college savings plan to support their continuing education.
A 529 plan is a college savings plan set up by a state or educational institution that offers tax advantages and potentially other incentives to make it easier to save for college and other post-secondary training for a designated beneficiary such as a child or grandchild.
A friend or a relative can set one up and name anyone as a beneficiary – the new grad, another relative, even yourself – and there are no income restrictions on doing so. You’ll also be free to change the beneficiary if necessary.
One suggestion – before you act, talk it over with the new grad or his or her family members to make sure this is the best approach for helping with their future education.
Start an investment portfolio. If your new grad loves a particular company’s goods, consider buying them a few shares. Again, evaluate this decision against your own finances and parental opinion, but consider going with them to a brokerage to buy a few shares in the company. Make it a lesson not only in the purchase process but in the valuation, tax and ownership issues anyone has to deal with as a long-term shareholder.
Even though your favored grad will probably own more investments in mutual funds over his or her lifetime, understanding the ownership of individual stocks will inform all the investing they do.
Bottom line: Money issues can be daunting for today’s new graduate. Why not disarm their concerns with some solid advice from experts you trust? By offering up basics in budgeting, saving and investing, you just might become one of their favorite gift givers.
Nathaniel Sillin directs Visa’s Practical Money Skills For Life financial education programs. Follow him on Twitter at twitter.com/PracticalMoney. His articles are intended to provide general information and should not be considered legal, tax or financial advice. Always consult a tax or financial adviser for information on how the law applies to your individual financial circumstances.