If your child has just graduated from college or the date is approaching, you (and they) are likely excited and nervous about what comes after. As I’ve advised hundreds of families on preparing for college, I can also give you a few tips for after they get their AA or BA — tip number one is to take a deep breath. 

Both of you can absolutely do this.

Here are some college graduate finance tips to deal with debt, uncertainty, and the world of personal finance. The sooner they start planning their finances, the sooner they’ll be planning trips, new car specs, and, hopefully, decor for their own home.

1. Invest in Financial Education

You know dealing with your finances takes a lot of skill, and you want to help your kid deal with the anxieties of starting out. Here are some financial education resources to take advantage of:

  • Books: Start with Suze Orman’s classic, The Money Book for the Young, Fabulous and Broke or Cary Sieagal’s Why Didn’t They Teach Me This in School?: 99 Personal Money Management Principles to Live By. 
  • Online courses: Direct them towards online courses on personal finance through platforms like Coursera or Khan Academy
  • Finance blogs and podcasts: Point them to reputable financial blogs and listen to podcasts that focus on budgeting, saving, investing, and other financial topics.
  • Workshops and seminars: If you find a link to financial literacy workshops and seminars offered by community organizations, schools, or local banks, share it with your kid. (If you think they’re interested, of course.)

2. Educate Them on Managing Student Loan Debt 

CollegeMoneyTips has all the resources for handling student loan debts for parents and graduates, so check out articles on home equity loans and other financial tools such as refinances.

The rest is up to your child. Make sure they understand the terms of their loans, including interest rates, repayment plans, and grace periods. Here are some basic tips:

  • Consider consolidating or refinancing loans for a lower interest rate.
  • Make extra payments when possible to reduce the principal balance faster.
  • Check out income-driven repayment plans with Federal Student Aid.

3. Build Good Credit

If your child has student loans, there is one more reason to pay them on time: building good credit. A good credit score can help them secure a loan, rent an apartment, or get a job. According to Experian, the average American has a score of 715, but anything over 670 is considered good. For starters, they can even have a fair credit score. 

Besides paying student loans on time, teach them about other ways to build a solid credit score:

  • Getting a secured credit card, using it for small purchases, and paying off the balance in full each month (you can help them with this).
  • Paying utilities and other bills on time (and using automated payments in their banking app to do this)
  • Encouraging them to monitor their credit report, check for errors, and make sure their credit history is accurate.

4. Build an Emergency Fund

I understand the economy isn’t really helping young adults leave money aside each month, but that does not mean they should give up on saving altogether. If your child doesn’t use change rounding apps or automated transfers to save, there’s a simple starting point.

With time, they should be able to save for at least three months of living expenses, which is considered a minimum emergency fund. It’s a lifesaver in case of unexpected medical expenses, repairs or additional certification opportunities. 

5. Prepare the Ground for Future Homeownership

I know, they’ve just started and may be in debt, so even broaching the topic of homeownership with them may feel like you’re getting ahead of yourself. Still, preparing for it ahead of time isn’t such a bad idea. Stats show the youngest generations have particularly poor financial literacy skills, so try to motivate your child with a clear goal. 

Here is what you can talk to them about:

  • Student loans: Student loans impact people’s borrowing power significantly, but they do not stop them from purchasing a home. They do affect eligibility, though: debt impacts everyone’s debt-to-income ratio, which is a key requirement. While the ideal DTI is 36%, some lenders allow DTIs of up to 50%. 
  • Researching mortgages: With low-to-moderate income, they can go with government loans such as FHA loans. If they’ve been in the military, VA loans can help them get a home without a down payment. For homes that are a bit more expensive or young adults who have been gifted down payments, a conventional mortgage (that is, a regular loan not insured by the government) may be a better choice as it may have lower interest rates.
  • Co-signers: If your child has a steady job and a regular income, and they’re set on buying a home sooner, you or another family member can help them qualify by being their co-signer.
  • Assistance programs: As a first-time homebuyer, they have the right to plenty of federal- and state-funded down payment assistance programs.

Finally, if you want to get them a highly useful gift, you can always schedule a talk with a certified financial advisor — they will help them reach their goals, whether it’s paying off student loans, buying a home, building savings or even investing (time is the magic ingredient that makes investments grow!).

And last but not least, congratulations to you and your child for making it through college.

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