Giving Grads the Gift of Financial Literacy

In high school and college, students are taking in loads of information. They’re learning the Pythagorean theorem, classical conditioning with Pavlov’s dogs, the theory of relativity and much more.

They could probably tell you all about ecosystems and the anatomy of the body, but they may have no idea how to make a budget. Unfortunately, many schools do not offer personal finance classes and the opportunity to learn basic money management tools.

A 2014 study by Kerry Tew and Dr. Philip Tew of Arkansas State University found that more than one-third of the 513 participating students did not know how much credit card or student loan debt they owed, and they overestimated their future earnings by more than 20 percent. In 2016, CNN Money reported the average undergraduate student borrower has $30,100 in loans, a total that was 4 percent higher than the previous year.

Rising college tuition and student loan debt aren’t new stories. If you have a high school or college graduate in your life this season, consider giving them the gift of a personal finance education so they can start off right in the real world. Building a healthy balance sheet early is always preferable to dealing with more debt later.

One of the best ways to give your grad a jump start is by enrolling them into Dave Ramsey’s Financial Peace University. This nine-week course covers everything from paying off debt to insurance plans, saving for retirement and investing. He teaches the importance of living within a budget and instructs students how to make one. The course walks students through the baby steps to get out of debt, build wealth and give generously. After purchasing the class materials and completing the course, your grad can re-take the class for free at any time in the future. There’s also an online version that offers 16-week access to the same materials.

If a nine-week course is a little much for this recent grad, financial advice books may be a good alternative for them to go at their own pace. Dave Ramsey’s Total Money Makeover covers much of the same information as the Financial Peace University course. His daughter, Rachel Cruze, recently published Love Your Life, Not Theirs, which resonates with young adults who are trying to establish themselves and navigate the real world. She provides key principles for dealing with the unhealthy money habit of comparing oneself with others, and she gives solid advice about reframing healthy attitudes about money. A new offering from Cruze is directed at the high school graduate; The Graduate’s Survival Guide is a book and DVD guide that covers topics such as balancing a checkbook, budgeting and additional college survival skills.

Set your grad up with a financial planner who can work one-on-one with them to put solid goals in place. If you work with a planner, that’s a good place to start, or you can visit the Financial Planning Association’s site, plannersearch.org, and it will help you find a financial planner in the location you need. Consumer and money-saving expert Andrea Woroch suggests it would be best to schedule a session with a fee-based planner who charges by the hour.

The question students are frequently asked is, “What do you want to be when you grow up?” Many may not know the answer even after graduation. According to Woroch, more than half of college students remain unemployed six months after they graduate. If he or she is still struggling to land their first job, consider giving them the gift of guidance by scheduling an appointment with a career coach to delve deeper into their passions, career preferences and skills. Career coaches can also help them with areas of the job search process such as cover letter and resume writing. The average fee for a career coach is $50 per hour.

A great investment option is opening a Roth IRA to start future planning for your grad. This gives them the opportunity to learn about the magic of compound interest. “Account holders make after-tax contributions, but principal and earnings are free from taxes on withdrawal at retirement, which is an enormous savings over time,” explains Woroch. She notes that they can withdraw contributions tax- and penalty-free at any age, so it could be used as a down payment for a house or other large life milestones.

Woroch also suggests purchasing stock or opening a brokerage account in your grad’s name. Following the stock market, reading a prospectus, and even managing a trade or two can be an important part of learning financial literacy.

Your recent grad is facing a lot of decisions and choices. Now’s the time to provide guidance and the opportunity to lay a strong financial foundation in their life. You could be giving them the tools for a better life! ■

Sources: andreaworoch.com, daveramsey.com, money.cnn.com, Kerry Tew and Philip Tew, Financial Literacy and the College Student (April 29, 2014), plannersearch.org and rachelcruze.com.