On the home stretch toward graduation day, long-term financial planning is probably at the very bottom of any college senior's punch list. So you might want to put it fairly high up on yours. Here are a few quick tips on thinking about a graduate's financial world and, perhaps, opening a conversation with them about building and managing wealth.
Does $1.75 trillion seem like a lot of money to you? That would look like a lot even to Elon Musk or Bill Gates. It's actually the total amount of outstanding student debt in the U.S.* The average grad leaves school with almost $41,000 to pay back. And that has huge implications for their long-term financial prospects. There’s nothing embarrassing about taking on debt for college, but paying it back is serious business.
Recently minted college grads—especially those with debt to pay back—face a variety of difficult choices. One is which job to take. The temptation is to take the highest-paying opportunity to start the cash flowing as soon as possible. But what if taking another position that pays less has much better prospects for career growth—and financial success—down the road? The first job out of college is key.
Moving to New York City or somewhere in the Bay Area sounds wonderful to a 22-year-old. After all, that's where lots of their friends are going. Two words: very expensive. Yes, the pay for certain jobs in these hot spots seems astronomical at first glance. But so do the rents and other cost of living factors. On the other hand, networking prospects will be better there than in most other places. Any advice here will probably depend of what line of business your grad is aiming for.
The prefrontal cortex doesn't fully develop until, on average, age 25.** This is the part of the brain that's responsible for judgment, decision-making, and complex planning—exactly what's needed for successful financial planning and wealth management. Again, they may not ask you for it, but they could certainly use some guidance on these things over the next few years.
We're not suggesting that you sit your favorite graduate down for a money talk as they walk off the podium with their diploma. But what you could do is think about what life looks like to them from a financial perspective, then offer yourself as a resource if they ever want financial advice. Just be careful with the wording here. As you know, "financial advice" and "financial help" are two different animals!
* Education Data Initiative. "Student Loan Debt Statistics."
** 5 Brain Myths: Fact or Fiction? https://wexnermedical.osu.edu/blog/brain-myths
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