How parents can help their college graduates establish financial independence
OKLAHOMA CITY —
It’s officially graduation season. Even after the class of 2018 collects their diplomas this month, many adult children will be relying on mom and dad to help them with the bills.
Experts say parents need to establish boundaries so they don’t put their own financial future in jeopardy by helping their kids.
“Parents need to set limits,” said Mark Rose, an investment advisor with Retirement Solutions in Oklahoma City. “It’s important to make sure the kids know this isn’t just a free ride forever, because the parents need to make sure their financial future is taken care.”
Rose says parents need to encourage their kids to set a budget and stick to it. The budget should include if mom and dad plan to help out and how much they’re willing to contribute.
“You have to figure out what are you going to spend, what your spending limits are going to be, and stick to those limits because that matters and you need to know where your money is going,” Rose said.
Many graduates will come out of college with thousands in student loans.
“Don’t let the student go into default, but teach your kid about responsibility and have them help pay it – or pay it all,” said Rose.
Help your graduate set up automatic payments to make sure they don’t miss payments or get hit with late fees.
As they work to pay down debt, twenty-somethings may not be thinking about saving for the future. Encourage them to start contributing to their employer’s 401(k) as soon as they’re eligible. It’s also a good idea to put away at least $25 a month into a savings account to establish an emergency fund.
If your child has to move in with you post-graduation, Rose recommends setting a limit on how long rent will be free.
“Some of that might be tough love, but figure out the best time frame and the best situation that you’re going to help your graduate be able to grow up and learn some ownership,” Rose said.