Talking to Your Child About College Graduate Finances

Finances
Mother and her daughter discussing college graduate finances with a financial planner

College graduate finances can take on many forms. For some of today's college grads, things can look drastically different from previous generations. There's now a higher percentage of adults in their 20s living with their parents than at any other point in the last 75 years, according to the Pew Research Center. And while the job market for recent college grads is the best it's been in a decade, according to CBS News, it can take some time for your child to gain their financial bearings.

Post-collegiate finances can sometimes lead to miscommunication and disagreements within families. Fortunately, communicating proactively and settling a few common questions ahead of time can help maintain parent-child harmony.

Moving Back Home

As members of the so-called boomerang generation, there's a likelihood your child may move back to the roost, even if only for the first summer after graduation. If that's the case, you may want to have an open talk about some of the details.

How long will your child stay? Is it until they go back to school, get their first full-time job, or simply find enough work to sustain themselves? It might be a good idea to set expectations and agree on a rough timeline beforehand. While it may be a tough conversation, consider talking about your own financial situations and goals. For instance, you may be focused on preparing for retirement or a moving to another city to enjoy a lower cost of living.

Will your child be responsible for paying rent and some of the bills? If so, what would be a fair amount? What happens if they're low on funds one month and can't meet their end of the bargain? Can they make it up by taking on more work around the house, perhaps caring for siblings or grandparents? You'll want to figure out and clearly delineate a suitable arrangement for everyone.

Student Debt Repayment

When it comes to college graduate finances, student loans are a big-ticket item. If you and your child took out student loans, how will the repayment be handled? First, you'll want to go over student loan repayment options to see which ones your child qualifies for and are the best fit for their financial situation. Will you help pay off their student loans? And for loans you took out on their behalf, will they be expected to pay you back at some point?

You may want to set clear boundaries and expectations around student loan repayment and potential collaboration from the get-go. Lack of clarity could lead to tension or misunderstandings, and might affect you or your child's ability to save for long-term goals (like retirement or buying a house).

Shared Credit Card Use

Setting your child up as an authorized user of one of your credit cards could help build their credit history, especially if it's currently short (or nonexistent). In that case, however, your child wouldn't ultimately be responsible for the balance on the card — you would. As their spending habits could affect your credit score and debt load, you'd want to have a thorough discussion of expectations should you decide to add them as an authorized user.

Aside from credit cards, if your child were to take on a car loan, you'd want to make sure they know how credit affects the terms and conditions they'd qualify for — and that making payments on loans is entirely up to them. If your child is asking you to co-sign on a loan with them, you'll want to consider both the pros and cons of doing so.

Tips on Having Money Talks

Financial talks are rarely easy or comfortable. Keep the following points in mind to help facilitate discussions that are beneficial to both you and your child.

  • Set aside time: Personal finance for college grads is complicated, and may be fairly new to them. Instead of trying to have a casual discussion while preparing dinner or running errands, carve out designated time to sit down to talk about money matters. Try to discuss everything — from budgeting to financial expectations and debt repayment — when both you and your child are in a good mood.
  • Focus on solving problems as a team: Instead of phrasing the discussion as "you versus me," try approaching it as a form of collaborative problem-solving. How can you drum up ways to help your child understand the importance of paying back all their debts on time? How does financial health and responsibility benefit both you and your child?
  • Be heart-forward: When having these talks, remind your child that you have their best interests in mind. At the same time, gently express boundaries and concerns. Making it clear that you're speaking from a place of love for your child and want them to be a self-sufficient adult is key to moving things in a positive discussion.

Be sure to communicate effectively and establish mutual expectations, as doing so can help foster a smooth transition into graduate life for the whole family. Clear, open communication can also help avoid tension and discord — and even pave the way for long-term financial wellness for your child. Ultimately, the goal is for everyone to win.

IMPORTANT DISCLOSURES

Information provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Western & Southern Financial Group and its member companies (“the Company”) does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.

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