Financial Gifts Your University Graduate Needs
(But Doesn’t Know Yet)
Have you ever wished that someone had told you all the financial lessons you know now when you were younger? What if you had discovered then that you can never start saving for retirement too early? Or that an emergency saving fund, rather than a closetful of clothes, would serve you better in the long run?
If you have young adults in your life — children, nieces or nephews, godchildren, mentees, etc — with summer already hot in the box, this is the time to start thinking about gift giving for the approaching university graduation season later this year. Rather than doling out money advice they probably won’t listen to, how about instead setting them on a firm financial path?
Here are some practical ideas to consider when you’re putting together your giftgiving strategy over the next few months.
Starter emergency fund
Cash or gift certificates are traditional items useful for broke young graduates, but these are financial gifts they will be tempted to use right away. In addition to these items, consider getting graduates started with seed money for an emergency fund. As we now fully understand, everybody needs a buffer when storms crop up, and nobody more so than graduates who may be still hunting for their first job or who may have only just begun to work and so perhaps haven’t built up significant resources. Graduates are extremely vulnerable if an unexpected expense comes up. If you can afford it, think about tucking away, say, three to six months’ worth of the cost of utilities for them for a rainy day.
Pay off student loans
In practical terms, you may not be able to pay off the entire debt. But, if you’re a mentor or an ‘auntie’, do consider a part payment. This will go a long way to help move the mountain of debt a graduate, especially a young woman, from a lowerincome household can be stuck under for many years to come, which can feel like a life sentence. Evidence seems to suggest that student debt jeopardises the wealth of households across the Caribbean, which adds to proliferation of the historical wealth gap and income distribution, with too few people seeing a marked upward movement in economic status than their parents’. Even if tertiary education marginally improves their lot in life, because of the burden of loan repayment, graduates’ long-term and retirement savings goals can be affected, not to mention lowering the possibility of home equity in the future.
Life insurance
A new graduate, let’s face it, doesn’t have the wherewithal to be paying policy premiums in addition to the other things they are trying to accomplish on their meagre income just to keep their heads above water and navigate this suddenly serious adult world. Life insurance isn’t a priority, they might think, especially if there aren’t any dependents in the picture. But a trusted adult such as yourself can gently nudge a graduate to see the benefits that both their youth and current healthy status afford them in terms of insurability. For a modest 20- or 30-year policy they can come into a windfall when they truly need it in middle age.
CD ladders for long-term saving
Certificates of deposit (CDS) are interestbearing vehicles designed for the long term. You can name your graduate as the co-owner and put money into a CD, agreeing to leave it there until its maturity date, when you can cash it out along with the interest it has earned over time. A laddered CD comes about by investing their graduation cash in multiple CDS with different, staggered maturity dates, let’s say 6-, 12- and 24- month terms so they can constantly keep earning interest. When the first one matures, your graduate can roll it over if they don’t strictly need the cash. In this way, they have the golden opportunity to see first-hand how money works for them to provide a little nest egg in the future.
Stocks, bonds and mutual funds
Recently, this newspaper carried a story about a 58-year-old man living in a shack made of rusty zinc, who was in desperate need of a pair of shoes. These stories are, sadly, par for the course in Jamaica, but what they always underscore for me is the failure to plan life’s financial course. Taking out stock shares, bonds and mutual funds actively shows that you care about your graduates’ financial future by providing options to start them out in life and ensure they don’t end up as another headline and cautionary tale of what failing to plan for the future looks like. Consult your financial advisor for details about which options are transferrable, which have less investment fees, and so on.
Bottom line
It’s never too early for young adults to begin thinking about their financial future. Give them a head start by making them aware of how money can work for them to build wealth.