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 Accredited Financial Counselor and University of Utah Professor Ann C. House, M.S., who serves as the Director for the university’s Financial Wellness Center. Professor House spoke with InvestorPlace via email to dispense some financial advice for recent graduates.
There is a need these days to be more strategic with our finances and with our life decisions. It used to be we would save and invest haphazardly through work, and make major purchasing decisions based more on emotions than economics. I don’t believe that this is a good course for our current graduates. They will need to set goals and work towards those goals step-by-step to meet their dreams.
Students will need to understand how starting early to invest will pay off for their retirement or for other long-term goals, such as a college saving account for their children. They will need to understand benefits from their employment, as too many individuals are not matching their employers’ contributions. If they don’t have retirement accounts through work, then our students will need to know how to save and invest on their own.
So often, when the debts come knocking, students have stated that they wished they had understood student loans earlier and if they had, they wouldn’t have taken out as much debt. We as educators have a responsibility to help our students know their options for paying for school and to help students take out only what is needed in loans. They learned about compounding interest in middle school, and now is the time that this knowledge should become real to them.
As far as we know at this point in time, these educational debts will not magically go away. In my private practice, I consistently see individuals who have ignored their debt or have made random payments, and now 15 years out of school are looking at $180,000 in unpaid loans, most of which is interest. There are options for student loan repayment, which should help the former student know that they are in control of their finances.
This pandemic, as well as the great recession of ’08, has demonstrated the need for having savings. CareerBuilder reported on Jan. 11, 2019, that 78% of workers live paycheck to paycheck and this most likely is worse today, given that as of last month, 40 million Americans have filed for unemployment.
We’ve been told to have 3-6 months of living costs in an emergency savings, but this is difficult to do when expenses equals or exceeds income. Calls to my office increased the first of April, just 2 weeks after we went into quarantine, with students saying they didn’t have money for their April rent.
Today’s graduates will need to budget, and then spend, save and invest with awareness. Our graduates will need to adapt the tortoise mentality from Aesop’s fable, ‘The Tortoise and the Hare.’
Building savings is made by the day-to-day decisions we make to spend less. Save even if it’s $2 a day at first, but be consistent and set this money aside. An emergency fund takes time to build. Repaying student loans will also be the habitual paying debt down each month, perhaps throwing a bit more towards the debt, until it is paid.
Graduates will need to understand benefits from job offers so they can wisely make their job choice. If offered little to no benefits, the graduate will need to calculate into their budget not only living costs, but also paying for their own healthcare or retirement.
Once a job is offered, salary negotiations can take place. Sometimes an employer doesn’t have a lot of wiggle-room here, but graduates should know that benefits can be negotiated with perhaps more room for discussion.
Lastly, I would advise graduates to consider jobs that offer professional development as a benefit. Experiences and training in their professional life will allow them to specialize in their field and to keep up in a fast changing world.