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Not Your Usual Graduation Gift

At colleges across the country, new graduates will be marching across stages to receive diplomas.  There’s one more lesson that will be invaluable as they enter the working world: financial security.  Parents and grandparents can help by underscoring the importance of:

Saving for retirement — The rocking chair and gold watch may be decades in the future, but the earlier a regular savings program is started, the more time the funds have to grow.  Even if an employer offers a 401(k), most graduates will also be able to contribute to an IRA.  Up to $5,500 can be put into either a traditional or Roth IRA.  Annual contributions of $5,500 over 40 years will grow to nearly $959,000, assuming a 6% interest rate.

Avoiding debt — Many graduates face significant debt before ever collecting their first paycheck, thanks to student loans and the use of credit cards in college.  Paying off any loans as quickly as possible enables the graduate to better save for long-term goals such as the purchase of a home.

Being insured — Many graduates will be facing the fact that they are no longer on their parents’ health insurance policies.  If coverage is not offered through an employer, individual policies are available.  Car, homeowners or rental insurance and life insurance are also important.

Philanthropy — Many older Americans know the joy of giving to charity.  While recent graduates might not have the funds to make substantial gifts, parents and grandparents can encourage the younger generation to give of their time and to consider ways to include gifts to charity in their budgets.



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