According to a survey completed by TD Ameritrade in 2019 on the “Boomerang Generation”, 50% of young millennials (aged 22-28) plan to move back home after college. 1 in 3 of these millennials move home for more than two years. While the majority of parents say they will gladly welcome their children home after college, most parents also expect to be empty-nesters by age 50. Obviously, having a child living at home longer than you anticipated can impede plans to travel save more for retirement. Here are some conversations you can start having with your kids now to better prepare them for the years following college graduation:
High School: Choosing a College
What high school student doesn’t fantasize about attending a university across the country (or globe) while living the picturesque dorm life? Maybe that is a viable option for your child, depending on how much you have saved for tuition. However, for many students, the traditional 4-year university path isn’t a great fit. For those students, it might make sense to attend community college for 2 years before deciding on a career path. Now, thanks to Tennessee Promise, that option is more attractive than ever – and free!
If you haven’t already started talking to your kids about money, the college conversation is a great place to start! Candid discussions about how much financial support you plan on providing during college and what they can do to chip in (i.e. work/save, good grades, high ACT scores), may evoke a few eye rolls, but the earlier you start the better.
College: Choosing a Career Path
Maybe your child has known what they want to be when they grow up since they were three, or perhaps they still have no idea what they want their career path to be. Either way, there are plenty of opportunities to have conversations about education requirements and job outlooks. If your child is still unsure of what to do, encourage them to take personality tests, such as Clifton’s Strengths Finders, and research different career paths. If your child is certain they want to be a professional penguin wrangler, ask them to find out what the education requirements are and how many such positions are available. Will grad school be required? How much does a penguin wrangler make? Is that enough to support the lifestyle that your child wants? Encourage your child to find a job or internship in their chosen field. Not only will this help them determine whether or not they have made the right choice, the experience may also help them find a higher-paying job after they graduate.
College Graduate: Building a Budget
If you have a child that is going to graduate soon, now is the perfect time to work with them on coming up with a game plan for after college. In fact, the sooner before graduation that your child begins planning for being on their own financially, the better! Whether or not your child has a job offer on the table, have them follow these steps to complete an initial budget. The process may be eye-opening, especially if they will have to drastically adjust their lifestyle to make ends meet for the first few years. Now is the perfect time to talk openly about money after college. Will you supplement their income? For how long? Are they going to move back home? If so, will they pay you rent? The more detailed the plan, the better. And it doesn’t hurt to write it down.
It is never too early to start talking to your children about debt, and student loans are no exception. It is no secret that students are graduating from college with more and more in student loans. In fact, the average balance in Tennessee is $34,526. Depending on interest rates, this balance will result in a monthly payment of approximately $350 for 10 years after college. That is A LOT of money. If your kids don’t believe you, have them go ahead and fill out that budget worksheet now. A general awareness of how debt can take away from quality of life and saving for other goals should go a long way when making decisions about college. Not all debt is “bad debt” and student loans are certainly a great tool to help advance a career through education when there aren’t any other options – so long as the amount of debt makes sense for the chosen career.
As parents, of course we want to encourage our children to follow their hearts, but it is also fair to say that we would like them off our payroll…eventually. The only way to accomplish this is to help our children bridge the gap between their dreams and making ends meet financially. Talking openly about money is a great way to ensure that your children start their lives on the best foot possible.