How to Help a New Grad

If you’ve got a new college grad in your family, I want to send a huge congratulations to you! That’s quite an accomplishment for you, as well as your child.

I hope you take more than a moment to enjoy all your hard work. And give yourself an A for getting them to this point.

Which brings us to the next stage of their life, which can have a huge impact on yours as well. A grad heading out into the working world can be a big financial risk, if you’re not smart.

Given the high cost of living in many parts of the country, I absolutely understand the urge to help launch your grad by offering some financial support.

Please slow down. We’ve got two big questions to contemplate

Can you afford to offer financial support?

If you are not on track with your retirement savings, the answer is no. If you have credit card debt the answer is a huge, loud, no. If you will not have your mortgage paid off by the time you intend to retire, the answer is no.

If your own financial situation is not at an A level right now, the biggest help you can give your child is to work on your finances. What they need from you, what they will be so grateful for down the line, is for you to be in solid financial shape in retirement, so they don’t have to step in and help.

Are you sure you would be truly helping?

Helping a young adult transition to being self-reliant is a profound gift that so many parents and grandparents trip up on. The urge to provide financial assistance (helping with rent, cosigning the car loan, continuing to cover their health insurance) comes from a great part of your heart. But if not done properly, it can backfire if it slows down their move to self-reliance.

Even if you are financially able to help, you should think hard about how your help can push them to start making smart choices.

If they need a car for work, then it better be the least expensive reliable used car you are helping with. Helping to pay for a new car is just enabling them to live beyond their means. And please make sure they shop for car insurance before they shop for a car. Premium costs are rising sharply in many parts of the country. A car budget should start with understanding how much insurance will cost. That exercise will also help them see the value of used vs. new.

Same with an apartment. It needs to be safe. It needs to be practical for work. But it does not need to be in the hottest neighborhood with the highest rents. And I would question helping with rent when there is no roommate(s). Please think hard about if you are enabling a lifestyle that is way beyond their needs. Even if you do step back from help in the coming years, you’ve raised the stakes they your child may be more prone to taking on debt, or choosing a job just to support a too-expensive lifestyle you inadvertently encouraged.

I also hope you start talking about a plan for when they will take over payment for their own streaming services and cellphone. Don’t tell me it’s no big deal. This isn’t just about the dollar cost. It’s about helping a young adult find their self-reliance muscle. You can let them stay on your plan, but it’s time you tell them that if they stay, they will start paying for a share.