This advice is part of a series InvestorPlace.com has compiled, inviting academics from across the U.S. to share their thoughts on aspects of finance that new graduates should know. Their thoughts have been presented with little to no editing. Today’s entry comes to us from Clemson University Professor Josh Harris, CFP and AFC, who spoke with InvestorPlace via email about financial advice for recent graduates.
New graduates should focus on understanding their need and goal for any saved or invested money. There are two primary goals for most young professionals, retirement and financial security.
Most retirement saving will occur in employer-based plans (401(k), 403(b), etc.) or Individual Retirement Accounts (IRAs). Saving for financial security, or an emergency fund, should take place in a bank or credit union’s saving account.
For both of these goals, new graduates should understand what their goal is, how quick they want to reach it, and what their preferences are on accepting certain levels of risk.
Students should understand their repayment terms. These terms are covered in required counseling before they graduate, but most forget or skim through this. Knowing how much they have to pay, how to pay it, and what their options are for different payment terms (forbearance, paying off early, etc.) are all listed on the loan provider’s website or accessible by phone if needed.
Students should also understand federal loan forgiveness programs if they work in public service, as these are great opportunities to forgive a portion of the remaining loan after a period of repayment.
Most graduates will probably be more risk averse regarding their savings and budgeting due to Covid-19. While there will probably be some splurging (especially traveling and eating out) right after we return to a state of normal, most graduates will probably want to keep a larger emergency fund, or channel more of their income to their savings in the future now that they’ve experienced first-hand, or seen through their friends and family, the risk many of us face in possibly losing income or having it severely reduced due to a global pandemic.
Graduates should evaluate health insurance and retirement packages for all new jobs. Most large companies will offer both, and possibly have a few different options for health insurance.
Outside of these two, graduates should understand if their employer provides other benefits, like life insurance, disability insurance, reimbursement for business expenses, support for flexible work schedules, support for family expansion (new child, adoption), and even loan forgiveness programs.
You can read the next installment of “Money Moves for Recent Grads” here, and find the entire collection here.
