Next month, the class of 2018 matriculates.

If you need a reminder for how fast time flies, consider that high schoolers graduating this year were born in the year 2000! This hits particularly close to home for me, as my oldest is headed off to Texas A&M University next fall (Whoop!). I will soon share with him my piece from last year, Personal Finance 101 for College Freshmen.

This year’s college graduates are the last of the Millennials (those born between 1980-1995), a generation known for their social responsibility and the value they place on life experiences over material wealth, and also for being more risk averse than their parents.[i] Who can blame them though, given all they have lived through?

They came of age during the bursting of the Dot Com Bubble, 9/11, and the Great Recession in the first decade of the 21st Century. Unlike the Baby Boomers and Gen X'ers, that largely viewed the world as a half full glass of opportunity, Millennials' experiences echo those of the children of the 1930’s that lived through the 1929 stock market crash, the Great Depression, and World War II.

Even more concerning for today’s graduates, the safety nets that older generations took for granted (or negligently maintained) on their journeys through the peaks and valleys of life probably won’t be as strong, or even in existence, by the time their kids are hitting college. Not only are pensions largely a relic of a past era, but Social Security is facing a looming crisis, and even company retirement plans such as 401(k)s look less promising in the age of the self-employed "gig economy", which is estimated to be 43% of the workforce by 2020.[ii]

While there may be a lot of appeal to the freedom and flexibility of being an independent earner, the onus falls on the individual to build their own net. So how can families help the younger generation get started?

Start with conversations about some basics.

A few to consider:

Set up auto pay for regular bills
Record keeping (like tracking apartment deposits, tax receipts, etc.)
Helpful apps and online tools (Mint, Personal Capital, BudgetPulse)
Build good credit (creditkarma.com)
Automate savings (The rule of 72)
The power of markets (Pursuing a Better Investment Experience)

Offer a matching gift

According to the National Retail Federation, Americans spent over $5.6 billion on graduation gifts in 2017.[iii] Perhaps some of those dollars could be better directed to encouraging more savings and investment. Some examples of how to do that:

Match savings contributions. Make an initial deposit in a savings account and offer to match a portion of your graduate's contributions.
Fund (or match contributions to) an IRA. Whether the graduate is eligible for a 401(k) or not, an IRA is always an option if they have earned income. Roth IRAs, funded with after-tax dollars, offer tax-deferred growth and tax-free withdrawals.
Consider gifting appreciated stocks/mutual funds. Appreciated stocks may have less tax burden for a recent graduate that has a lower income bracket and may also stimulate some interest in investing.

Graduation is an important life event. Good financial habits formed at this time can lay a foundation that will allow a graduate to not only pursue their passions today, but also be able to do so tomorrow. It can also be a time of reflection and an opportunity for Mom and Dad to ponder their future. If you would like help with your plan, get in touch.

[i] Daniel Kobler, Felix Hauber and Benjamin Ernst, "Millennials and Wealth Management: Trends and Challenges of the New Clientele," Inside, June 2015, https://www2.deloitte.com/lu/en/pages/financial-services/articles/millennials-wealth-management.html.

[ii] Patrick Gillespie, "Intuit: Gig Economy Is 34% of US Workforce," CNN Money, May 24, 2017, http://money.cnn.com/2017/05/24/news/economy/gig-economy-intuit/index.html.

[iii] "Graduation Spending to Reach Record-High $5.6 Billion," National Retail Federation, May 17, 2017,
https://nrf.com/media/press-releases/graduation-spending-reach-record-high-56-billion