These days, an increasing number of college graduates move back home after they’re done with school. Parents of recent graduates might not have anticipated they’d have roommates again so soon but with the crushing weight of student loans, most grads aren’t in a financial position to strike out on their own.

Beyond living with their parents, many graduates get ongoing financial help from mom & dad; this puts a strain on the family, as parents of recent grads are probably the prime age to be aggressively saving for retirement.

With the average grad from public colleges carrying over $25,000 in student loans, and the average grad from a private college carrying over $32,000 in debt, that’s quite the burden (source). On top of that, the typical graduate owes over $12,000 in other debt like credit cards. That brings their total average debt to around $40,000.

Six Financial Tips for Recent Graduates

With all of this debt to contend with, recent grads need to be careful to get started on the right foot.

1. Create a budget. Really plan where you are going to spend your money, and don’t spend on impulse when your discretionary funds are gone. When creating a budget, devote a month tracking what you spend so you know what your obligations and expenses are, and when those bills are due each month.
2. Save! Even if it’s a small amount, start saving now and build the habit. Have some amount automatically deducted from your paychecks and deposited directly into savings. If you have a job that offers a retirement plan, contribute there to your retirement account and be sure to take advantage of any matching contributions your employer offers.
3. Create a fund specifically for emergency savings. Your goal should be to have enough money to get through three months without any income—this will give you time to find another job without having to resort to credit card debt to survive. Never, ever use credit as a substitute for income!
4. Don’t miss any payments. Make sure you pay all of your bills on time, as you’re just establishing a lifetime of credit history, and you want to have the strongest start possible. Use your bank’s smartphone app or web site to get bill reminders and use online bill pay to ensure you’re never late.
5. Keep your debts paid off. If you have credit card debt already, stop borrowing and focus on paying off what you owe. Learn to live on a cash basis so you’re always able to live debt free.
6. Monitor your credit. Check your reports & scores regularly. You can get a free report at annualcreditreport.com. You typically will have to pay for a credit score, though. If you have any concerns about identity theft of anything strange appears on your report, consider credit monitoring to ensure that your report is accurate and free from damaging fraud or other mistakes.

Six Tips for Parents of Recent College Graduates

Parents of grads will have their own challenges, and should heed these tips.

1. Don’t let your kids’ college derail your retirement. You spent a lifetime building up the funds you need to retire, so don’t spend it all toward your kids’ degrees. Keep your retirement savings intact while helping your kids get through college.
2. Help your kids to be financially literate. Help them create a budget, set goals, manage their own finances. Offer as much oversight as they’re comfortable with. If you can track their spending for a while, you can help guide them toward true financial freedom, but be careful you don’t get sucked into bailing them out financially—that’s a bad habit to start.
3. Talk with your student about college loans. If your kids are going to finish college, it’s likely some form of student loans will be in the mix. Work with them to understand exactly what their future financial obligation will be, and make sure they create a plan to meet this obligation after graduation.
4. Make any help temporary. If you must financially assist them or let your kids move back in with you after school, make it clear this is a temporary arrangement until they get established. You might set a deadline after which you will start charging rent & utilities. Make this deadline clear and predictable for them, and stick with it. This is your time to teach real financial responsibility, and that’s something most college degrees don’t impart.
5. Don’t sacrifice yourself for your college grad. You shouldn’t go bankrupt helping your kids. They have fresh college degrees and a whole lifetime ahead of them to find a career and sort out their finances. Don’t put yourself in financial danger helping them get through a temporary transition to adult responsibilities.
6. Encourage them to hit the ground running. College grads might naturally want to take the summer off—they’ve likely been doing that all of their lives. But to get started on a career, they need to get out there and get hired, not wait until fall. And even if they don’t have the perfect job waiting for them, that’s no reason not to get started developing their career. Most people only stay in a job for a few years, so they should get started in the world of work right away and plan to move to their dream job after they’ve built up their resume.

If you’re recently graduated or have kids who just finished college, then stop and take some time to get a clear financial plan for the future. If you don’t know where to start or have questions, credit coaching can help you create a plan that works, and will be tailored to your unique situation.

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