It’s that time of year again. Graduation season is in full swing, and everywhere you look there are top ten lists telling you the best gift you can give the graduate in your life.
While it’s always nice to receive presents, particularly when they commemorate the hard work necessary to earn a diploma or a degree, I would say the best gifts you can give your graduate can’t necessarily be wrapped in pretty paper and tied up with a bow.
If you really want to give a new college graduate a gift that will last him a lifetime, think about giving one of the following things:
1. Clear Boundaries
It used to be that college graduation marked the end of young adults considering their parents’ house to be home. But now the so-called Boomerang Generation is becoming the norm, and many families are finding that their young adult children are ending back in their childhood bedrooms.
This is a tough situation for everyone, and one of the best things that a parent can do for his returning graduate is to set up clear boundaries from the get-go. Let your child know how she is expected to contribute to the household, whether through rent, chores, or a continuing job search.
And, set up a plan together to eventually get her living on her own. It may feel awkward to discuss these matters, but feeling like a contributing and respected adult in a childhood home will make a huge difference to your graduate.
2. An Interview Suit
Landing that interview for the dream job can often be a source of stress for new graduates, rather than a cause for celebration. That’s because many students don’t have the right threads to impress HR in the interview, and are stuck either putting together a not-quite-appropriate outfit from what they already own or trying to borrow a suit from family or friends.
Take your graduate shopping to buy a good, perfectly-fit suit for the interview process. Not only will your grad look great, but he will also feel more confident during interviews.
3. Budgeting Help
For many people, the word budget has an unpleasant, if not frightening, connotation. But jumping into adulthood without this skill can set young graduates up for a great deal of stress in the future. If you know that a graduate in your life hasn’t been raised with a budgeting mindset, offer to help her figure out a basic one. This could be as simple as giving her a copy of a personal finance book, or as complex as setting aside some time with her to go over the details of her finances.
Obviously, this is not a gift you can present to a young adult you’re not close to—or one who is not interested in this kind of help. But if you know a graduate who is feeling overwhelmed with the financial aspects of adulthood, she will use and appreciate this gift for life.
4. Lunch with an Influencer
If you have friends in high places in your graduate’s field of choice, a great gift would be to take your friend and the grad out to lunch together. That will give the new graduate an excellent entrée into important networking within his field. All for the price of a nice lunch out.
5. The Gift of Planning
We all know now that retirement contributions made in your 20s have incredible power for growth. But how many of us really understood this in our 20s? Guiding a new graduate through financial planning will help her to know where she wants to go in life, and how she wants to get there.
This gift can be accomplished in a couple of ways: for example, you could sit down with your graduate and talk about her long term plans for career, travel, family, etc, and help her make a plan to get there. Alternatively, you could simply introduce your graduate to your financial advisor. Either way, you are helping her to map a financial course for her life.
6. Matching Retirement Contributions
While it is not possible to directly contribute to another person’s 401(k) or IRA (unless you are married to the recipient), you can still help incentivize your graduate’s retirement contributions by offering to match them—in cash. For his his first year of employment, offer to send a monthly check matching the amount of money that he puts aside in his 401(k) or IRA (up to a limit) to an interest-bearing savings account. At the end of the year, you will transfer the money (plus interest) over to the graduate.
This gift will spur him to get used to making larger retirement contributions and living on the somewhat reduced paycheck. With the power of compound interest, your relatively small gift now will pay off in spades over the next forty years.
One caveat: make sure you are aware of the gift tax when making this generous offer. The current annual limit for a gift to any one individual is $14,000. If you give more than that amount in one calendar year, the excess may be subject to federal tax.
The Bottom Line
Giving these kinds of practical gifts to a graduate might not make you the favorite aunt or uncle at the graduation party. But being a personal finance mentor is often the best gift you could ever give.
What’s your recommendation for an intangible gift for grads?