Every generation brings something unique, but this graduating class is very different. They are the last of the Millennials and eclipse prior generations in size, education level and diversity. Most live in urban centers, shun time-honored institutions such as political parties and religion, less likely to be military veterans, and defer marriage and having kids. They strive for a better work-life balance, yet they are entrepreneurial. They value life experiences, same-day delivery and absolute convenience, and they are digital nomads.
And while they have incredible wealth building opportunities, they have unique money challenges. One of their biggest financial concerns is massive student debt with an average of $48,000 driven by rising college costs or bad decisions. Finances are just one reason why some students choose associate degrees and vocational schools as an alternative. Some aren’t ready for four years of college, others have a specific job in mind, while others want to get a jump on earning a paycheck.
Before running out to buy a gift card or stashing some cash in a congratulatory card, consider these seven financial-savvy gift ideas for the college graduate in your life:
Match savings contributions
Help them develop good savings habits and open a savings account. You could make the initial deposit and match his or her savings. For 2019, you can give $15,000 to a recipient free of gift taxes (a couple can gift $30,000 per recipient).
Student loan payments
You could accelerate loan payoff or reduce monthly payments for the graduate by offering help during the six-month grace period following graduation. Many loans have a six-month deferment period as the student lands a job. Interest may or may not accrue during this period depending on the loan. Your payment options include writing a check, using a gift card such as GiftofCollege.com (can go directly to the student’s loan account), or spreading your gift in installments.
Assist with bills
What gaps can you fill in the graduate’s budget? Pay their health, auto or disability insurance for a specified time period? Contribute to the rent, buy a Trader Joe’s gift card, or assist with an upcoming expense (moving, furniture, etc.)?
Help them enroll in their company’s 401(k) plan, walk them through the investment menu and match their contributions. The contribution limit to your 401(k) plan for 2019 is $19,000.
Help them start an Individual Retirement Account (IRA). They may have a one-year wait for 401(k) eligibility, no employer plan or be self-employed. The contribution limit for an IRA this year is $6,000.
Give stocks with youth appeal
Did you get a Disney stock certificate from your folks when you graduated? Open an account for the graduate and seed it with familiar stocks. Here are some examples (do your homework though; I don’t know your specific situation) – Apple, Starbucks, TripAdvisor, Facebook, Amazon, Netflix, Chevron, etc. If your budget is smaller, checkout Stockpile where you can buy a gift card in the amount of $25, $50, or more, and buy fractional shares of stock ($50 card with say 0.025 shares of Amazon).
Give appreciated shares of stock
If there’s likely to be some wealth remaining when you die, then consider transferring some wealth to your graduate now by gifting appreciated stock. They can sell and reinvest the way they want or pay down student loans. The strategy is to transfer wealth tax efficiently and works if the graduate is in a lower tax bracket than you. And like all tax strategies, consult your CPA or enrolled agent for tax advice.
Investigate broader uses of these plans. They can be used for qualified expenses for college and vocational school expenses, including tuition and fees, books, computers and tools, and room and board. They were expanded with up to $10,000 for tuition to eligible public and private K-12 schools. Current bills in Congress have provisions permitting wider use of 529 monies – to pay down student loans, homeschooling costs and expanding qualified K-12 expenses.
These wide-eyed graduates are off to their new adventures. Help put things in their favor and guide them in their financial success.
They too can secure their future wisely.
This article can also be viewed at the Reno Gazette Journal.