It’s incredible how fast the year goes by; it’s already June. Kids all over the country are graduating and starting new chapters in their lives. Traditional gifts like an envelope of money or a Hawaiian lei are the norm, but it wouldn’t hurt to consider a few non-conventional gifts that might be equally as meaningful.
In America, Land of the Free, higher education is anything but free. In fact, the U.S. actually leads in having the highest average annual tuition fees, worldwide[i]. However, with education being the pathway to future career opportunities, many are willing to take on debt they would not normally consider. Today, 70%[ii] of college graduates are leaving school with debt. That means roughly one in four American adults are paying education loans, which amounts to approximately $1.5 trillion in student debt. Studies have shown that young adults have delayed buying homes, starting families and other major life decisions until they are more financially stable, due in part to the burden of debt.
With that in mind, it may not hurt to consider the traditional graduation gifts in combination with a few practical ones as well. Here are a few ideas:
Gift Card to Purchase Books
Text books and course materials can be shockingly expensive. For high school grads heading to college, a little help with books could go a long way. Many colleges still sell books in the campus bookstores, but often schools also use the services of education material suppliers. These suppliers provide students print and digital content that can be ordered online and picked up at school or downloaded. If you know where the student is going to college, you can buy a campus bookstore gift card. Other textbook gift card options could include Amazon or Follett.
A Professional Suit
Whether graduating from high school or college, having a quality suit in your closet is essential.
I remember being invited to a networking event with possible future employers by the Dean of the accounting school. As a Sophomore in college, my wardrobe consisted mostly of jeans and hooded sweatshirts. In need of a presentable suit, I went to a local department store and came home with an economical suit, to which my roommate commented, “I’ve never seen a suit made from this material before.”
Economical suits may work out in the short term, but an affordable quality suit might be an ideal gift that keeps on giving.
Introduction to a Financial Planner
Schedule your graduate’s first meeting with a financial planner. While they might not know what questions to ask now, the more powerful tool is that they’ll know who to ask when they have a question – in addition to their sounding boards: mom and dad. A financial planner can give them advice on how to receive financial assistance for education expenses in the most tax efficient manner or how to effectively put savings away when they get their first real job. Once employed, a financial planner can help customize an investment allocation for their work sponsored retirement plan and advise on a budget for paying down student loans. The earlier people start saving for retirement, the more financially sound they’ll be the rest of their adult lives. An introductory meeting with a financial planner can run in the range of $300-$500, which can be prohibitive for a young adult on a budget. Some financial planners will offer a complimentary introductory meeting if they’re already working with members of the family.
Roth IRAs are one of the most powerful ways for a young person to invest. That is because young adults have the power of time on their side. If you look at the history of the stock market, including the Great Depression or the more recent Great Recession, there is no 10-year investment window where you would have lost money if you stayed invested the whole time. In other words, as long as you implemented a buy-and-hold strategy for an investment period of 10 years or longer utilizing a globally-diversified portfolio, you would not have lost money[iii], even if that 10-year window included a dramatic market decrease like the Great Recession. The stock market is resilient. Some of the best market surges in history were immediately following a dramatic stock market downturn. If you are invested in a Roth IRA, not only will you benefit from market growth, all the gains in your investment account are tax-free. There are many rules about investing in Roth IRAs such maximum annual contributions, participation limits based on your total income, etc. Consult your Financial Planner or CPA if you feel the Roth IRA might be the right savings vehicle for your graduate.
For advice on any of the above strategies, gifting appreciated assets, or investing in preparation for college through the use of a College Savings 529, reach out to your Certified Financial Planner™ or CPA.
Congratulations to your graduate and best wishes to their future!