Important money lessons for new college graduates

My biggest financial blunder more than

40 years ago still haunts me today. Fresh out of college, I stumbled right out of the gate with poor money management decisions. First, I failed to take advantage of a financially friendly stock purchase plan offered by my new employer. What a mistake since the stock was offered to employees at a 15% discount from the market price.

I left some profits on the table.

I then compounded that misstep by setting very little aside from my paycheck for emergency savings. I was living paycheck to paycheck — or at least it felt that way in my then 22-year-old mind.

Chalk it up largely to not having much of an understanding about the stock market, no rough idea how to budget since I had never tried, and not having any financial goals other than to build up my record collection with monthly purchases of vinyl. My priorities were out of whack.

I mention this now because finances are going to be a bigger factor than ever before in your child’s life if they’ve just graduated from college, are living independently and just beginning full-time work. Poor saving and spending habits early on can haunt you later when trying to buy a car, get approval on a home loan or when merging your finances with a significant other.

Parents, what can you do to help ease your child’s transition?

I’ll start with what you shouldn’t do: Don’t continue to provide financial support and monthly bailouts when your new grad runs short. You should be weaning him or her off the family payroll by handing over responsibility for student loan payments, car insurance and the like.

If all that’s too much at once, start building toward that goal.

Another idea: Pay for several hours of time for your new grad to meet with a financial planner. Rather than inserting yourself into the middle of those conversations, turn it over to a professional to discuss budgeting, selecting an appropriate credit card, understanding the ins and outs of the employer’s workplace retirement and benefit plan, and everything else that will help build a solid credit history starting at the get-go.

I’ve said this before, but it could be the best $200 you’ve ever spent on your son or daughter.

At the very least, they’ll have a better understanding of the difference on their paycheck between gross income and net income.

Seriously, over the years, I’ve had more than one parent tell me their child was greatly disappointed when their first paycheck was smaller than anticipated because of a thing called taxes.

If paying for professional help is not feasible, help guide your child through the often confusing employee benefits package. Does your 20something need life insurance beyond the minimum amount covered by the employer? How does a health savings account work? How much could be socked away every month in the

401(k) retirement plan?

I didn’t have the “money talk” with my parents, so I learned through hard knocks. It took me three years before I finally invested in the company stock purchase plan.

I was also schooled in one other way: It’s better to make mistakes when the financial stakes aren’t mammoth and there’s plenty of time to recuperate.

Questions, comments, column ideas? Send an email to sbrosen1030@gmail.com.

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