3 Ways to Give College Grads Cash — a Lifetime of It

Match your grad's savings or payments on debt, suggests Jorge Padilla, a certified financial planner at the Lubitz Financial Group in Miami. Say a graduating senior has the average student debt burden for 2015 of about $35,000. Parents or relatives might match every dollar paid above the minimum loan payment, or every dollar saved in a Roth IRA or savings account. A gift to match student loan payments can be a great motivator, said Erik Almon, director of financial planning for the Society of Grownups, a Brookline, Mass., financial literacy group. "People get out of college and make those first few loan payments and say where did that money go, because payments at first just barely cover interest costs," Almon said. "If you match, they'll see progress in paying down the loan, pay it off faster, and pay a ton less in interest." Or, if you give cash, tell beneficiaries you'll match whatever portion of that money they put in an IRA, said Hui-chin Chen, a certified financial planner with Pavlov Financial Planning in Arlington, Va.

"This way the kids have to think about how much to save and how much to spend, and learn about the benefits of saving in tax-advantaged accounts for the long term before playing with any brokerage account," Chen said. Investments — and investing lessons

A mutual fund investment, along with an investing lesson, is what R. Patricia Grenier, a certified financial planner in Springfield, Mass., gave her recently graduated son. She followed a certificate for an investment in a mutual fund with a session on investing and compound interest and an illustration of the portfolio's past growth . She topped it off with a small amount of cash "so he wouldn't resent the financial investment and not getting any short-term gratification," she said.

Some planners say—and they would, wouldn't they?—that the best gift at the start of working life is to help a graduate plan for the future. That means sessions with a planner and/or a financial plan.

"You can help them avoid falling into some traps that can lead to bad habits, like overspending and running up credit-card debt," said Craig Larsen, a certified financial planner at AHC Advisors in St. Charles, Ill. "It may also help them plan for handling the student debt they have."  

The cost of a financial plan varies widely. Larsen cites a range of $1,500 to $3,000. A series of meetings with a planner at Beth D'Andrea's firm, Plum Tree Financial Planning in Malvern, Pa., might cost from $1,200 to $2,000, she said. Many grads don't call for their sessions right away. "But once kids get that on-boarding kit from their new employer and have to fill out all of those forms, my phone starts ringing," D'Andrea said. Her LaunchPlan package covers "everything from cash flow management and budgeting to student debt pay-down to even helping pick benefits and work and retirement plan options."Tax-savvy parents can give their child the amount of a financial plan's cost. If the cost exceeds 2 percent of the grad's income for the year, the child can deduct it, Larsen said. And that, he adds, "helps remind them that there are important things to be aware of in the tax code."

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