Financial tips for college grads: Watch the credit cards, get health insurance
20 05 08 - 15:23
By Peter Schworm, Globe Staff
Diplomas in hand, college graduates are heading off into the “real world," where a daunting economy and sluggish job market await. Smith College economics professor Randall K. Bartlett, who teaches in the college's Women and Financial Independence program, said recent graduates need to make a concerted effort to manage their finances well as they enter post-college life.
Bad decisions now could haunt the graduates for years to come.
"Money comes in hard and goes out easy," Bartlett said. "How you plan your finances now can have huge ramifications on how your life will play out."
To help grads along their way, Bartlett recently provided a few thoughts on the economic climate and some tips on getting a financial life:
-- Explore ways to consolidate student loans and tailor payments to income. Most important, avoid running up credit card debt. With credit card interest rates typically hovering between 16 percent and 20 percent, even relatively small balances can lead to large interest charges over time.
-- With an unemployment rate of just over 5 percent, most graduates should be able to find a job, although it might not be their dream job. Students should cast a wide net, apply for a range of positions, and keep an open mind about relocating.
-- You'll need health insurance, despite its high cost. Plans are available with high deductibles that only cover catastrophes and may be attractive to young graduates.
"Don't go without some kind of health care," Bartlett said. "It's a very high risk. With today's prices, one unfortunate accident or malady can turn into years or decades of medical debt."
-- Don't lose touch with your college roommates. If you were comfortable living with them before, it may be financially beneficial to do so again.
"For most recent graduates, the way to make housing in the most expensive cities possible is to recognize that you will need to find others to share the cost," he said.
-- Starting a long-term investment program – however modest -- at a young age can pay massive dividends.
"If students invest even a tiny amount regularly and let it build for 30 or 40 years, the payoff by the time they're at retirement age will be astronomical."