Steve Punch, President & CEO
Congratulations – you’ve earned your degree and that’s a lifetime accomplishment. You’re starting out on your own and it’s time to determine the next step. As a CEO (and a Dad), I’m sometimes asked what new graduates should do now?
We are seeing some signs that the economy is improving, but it’s not recovered yet. The under 25 crowd still makes up the largest percentage of unemployed, almost twice the national average.
If you’re lucky, you have a job lined up, but if not, consider taking a postgraduate internship. I know an internship may seem like a disappointing first start; however, many companies offer internships as a stepping stone toward full-time employment. You’ll gain real world experience to compliment your degree. Better yet, you’ll get a better sense if the industry or job is suited for you.
You should also put the word out to your network. Don’t underestimate the reach that you have at your fingertips. Put together a gentle, professional email to your friends, family and former teachers or professors to let them know that you’re looking for opportunities and you’d appreciate any referrals or advice. Include a well thought out and constructed resume if you have one, relevant courses and what type of jobs most interest you. Keep realistic expectations about income and focus on getting your foot in the door.
Pay off debt and budget.
Graduates often are saddled with debt after graduation. Student loans typically have very high default rates, meaning many graduates are unable to repay their loan obligation. To avoid missing payments and damaging your credit, take charge of the situation right away with planning and budgeting.
Keep track of where you spend your money and control your costs. Cut the fancy coffee, too many nights out and music downloads. Most importantly, avoid taking on more debt. To get control of your finances, you need to make regular monthly payments on your debt obligations.
It’s important to be realistic. Can you afford to rent an apartment? Or, does it make more sense to move back in with mom and dad? Is buying a car in your immediate future? Or, is public transportation more your speed?
Finally, get help if you need it. Ask a parent or family member to help you get your budget started or speak with a free credit counselor through your school or county.
Don’t forget to save! If you’re fortunate enough to find a job, try to stash 5-10% of your income for emergencies, goal-based expenditures or a rainy day.
Back to School.
Many recent grads are continuing their education because of the difficulty of finding a job in this market. This may be a good option for you.
Before you make your decision, however, carefully consider the additional cost associated with more school and whether your intended career warrants further education. Will another degree or an advanced degree give you a leg up on a job or higher pay? If not, there’s always time for more school, so don’t be pressured to continue straight through. Plus, being in the workforce could change your professional direction. Most of us didn’t start out thinking we’d be doing what we’re doing now. Especially me.
Graduating college is an excellent first step toward a bright future. You’ve done well and I wish you continued success.
by Barbara, Vice President, Human Resources
Allowances can be a great way for kids to develop good money management skills. An allowance can teach a child to carefully prioritize wants, to consider how much things cost, and to appreciate things that they purchase with their own money. These are important stepping stones toward a bright financial future.
A good age to start considering an allowance is about five. My kids were ready at different ages, so I encourage you to consider their maturity level. Does your child understand the concept of giving money and receiving something for it? Does she know the different values of coins and bills?
Some experts say to align the amount with your child’s age, for example, $5 for a 5-year old. However, it’s important to make your child’s allowance commensurate with how you expect them to use their money. Do you expect that your child will pay for their round of mini-golf? Or simply a candy bar after mini-golf? That’s up to you.
Make your expectations clear.
Clarity is important. Your child should understand their allowance amount and what they will have to pay for themselves. Perhaps you’ll pay for jeans, but if they want name brand jeans, that’s up to them. Or, maybe you’ll pay for all clothes, but they pay for activities with their friends.
Experts caution against paying your child for household chores. A child should contribute to household chores because they are part of the household. However, if you’d like to pay them for going above and beyond, that is an option. For example, a longer walk for the dog or cleaning up the garage.
Pay your allowance on the same day each week and set an expectation for making the money last. If you let your child borrow into next week’s allowance, they may not grasp the concept of making the money last.
For older children, however, this could be an excellent opportunity to engage your child in the concept of borrowing money. Let them know that they have to pay for that privilege, just like adults pay interest when we borrow money.
Kids grow fast and you may consider adjustments, “raises” or changes in your agreement. Continue to assess your allowance system every six months and talk over your arrangement with your child. You can review how he’s been spending and saving his dollars and discuss possible increases. This is the perfect opportunity to impart some of your own values and financial wisdom.
You may also be interested in my article “Summer Jobs For Kids” in the article list at left where I talk about a good structure to teach kids about saving, spending, donating and paying yourself first.
Most importantly, don’t forget to pat yourself on the back for your efforts! Your child’s good financial habits can last a lifetime.
Kristin, Vice President, Marketing and her son Ryan
It’s that time of year again. Meeting new teachers, stores filled with pencils and backpacks and wondering where the summer went. If you’re like me, you’re also concerned about the future cost of education and what’s the best way to save for your child.
Pacific Service CU can help you organize or open accounts to benefit your dependents and you. We offer ways to prepare and protect your investments for the future of your children or grandchildren.
Here are a couple ways we can help:
Living Trust Accounts
A living trust allows you to direct how your assets will pass to your heirs. One of the benefits to a living trust is that the trust assets may not be subject to probate — potentially saving thousands of dollars. You must have your trust agreements established before we can set up your trust account.
Coverdell Education Savings Account (ESA)
The Coverdell Education Savings Account (ESA), often called an Education IRA, allows individuals to save money for a child’s education on a tax-favored basis. Members can deposit after-tax contributions up to $2,000 per child, per year depending on their income. Contributions and earnings are tax free when withdrawn to pay for qualified education expenses for that child.
Gift to Minor
Another flexible and cost-effective way to save for a child is a Gift to Minor account. We can set up a custodial account which allows you to gift assets to a minor during your lifetime. You can give up to $12,000 per year ($24,000 per year for a couple) without having to pay federal gift tax. Other adults may also contribute to the account (hello Grandma!) as much as $12,000 per person per year free of federal gift tax. While the minor is below the legal adult age, a custodian must be appointed to the account. All withdrawals must be for the benefit of the child until after the child reaches legal age. Upon reaching the legal age, the minor gains control of the account. Withdrawals can be used for any purpose.
Auto Transfer and Direct Deposit
Ask your employer about having part of your paycheck deposited automatically into your child or grandchild’s Education Savings Account or Gift to Minor account. Or, set up automatic transfers using BranchLine. With systematic deposits, the accounts will grow maintenance free.
Products, Services & Education
We know that each stage of your child’s life brings new and exciting challenges. That’s why we’ve designed products, services and financial education with a younger lifestyle in mind. We offer the tools to help you help your child navigate through the world of financial services and are committed to helping our young members grow into financially-responsible adults.
Please consult a tax advisor or attorney to determine if any of these accounts are appropriate for you. For more information about any of these services, please call one of our friendly member service representatives at (888) 858-6878, ext. 6231.
Pacific Service CU cannot give members financial, tax, or legal advice regarding Living Trust Accounts, Gift to Minor Accounts, or Education IRAs. Please consult a tax advisor or attorney for more information about these accounts and to determine if any of these accounts are appropriate for you. Stated contribution limits are for 2009 tax year and may change for future tax years.
Steve Punch, President & CEO
Heading off to college is an exciting time. It can also be an overwhelming experience. Truth be told, my son was excited; it was me who was overwhelmed by the thought that my little boy had grown up.
For the majority of college bound students, college represents the first step toward financial independence. This is the first time they’ll really learn how to handle money, when to spend money and how to budget. After you drop them at the dorm, it’s pretty much sink or swim for your child.
Here’s how you can provide them the tools they need to take care of their money today, as well as start building a solid financial foundation for tomorrow.
Your student needs a checking account to pay tuition, buy books and, of course, for late night pizza runs. Our FirstStep checking account has no monthly fees, no direct deposit requirement and we reimburse ATM fees. So, no matter if your child is looking at community college or has his or her eye on NYU – you know they won’t waste money on ATM fees.
Plus, it’s easy to set up recurring transfers to your child’s account online or by phone – you can even make deposits directly from your paycheck. Transferring money in a pinch is easy too. You can do it online and funds will be immediately available.
Many students open their first credit card for a “free” giveaway like a t-shirt. Along with their freebie, they probably will get a high interest rate and often an annual fee. I encourage you to research credit cards with your student and find a low-rate option with no annual fee, like our Visa Platinum Starter Card which features a low initial limit to help teach responsible spending. With timely payments, they’ll start building their credit. After all, their first car or mortgage loan isn’t that far away.
School, work, trying to fit in a social life – college life can be demanding. Luckily, with a little preparation, you can you drive away from campus with a feeling of confidence. (And maybe only a few tears.)
I read Kristin’s post about summer vacations and it reminded me of my summer dilemma – what am I going to do with my kids? Each year, we string together a series of day camps, vacations, shared babysitters and visits to the grandparents.
As a hiring professional, as my son gets older, I have to wonder, when is it time for a summer job?
According to the U.S. Department of Labor, the minimum age for employment is 14. Even then, your child is limited to three hours of work on a school day, 18 hours in a school week, eight hours on a non-school day, 40 hours in a non-school week, and all work must be performed between 7 a.m. and 7 p.m. except from June 1 through Labor Day when nighttime work hours are extended to 9 p.m.
Other considerations for job age kids are transportation, playing it safe and advice on how to spend their money.
This is a good time to teach your children the value of money by saving a portion of every “paycheck,” even if it’s from you. You may also consider asking your children to give a portion of their income to a charity.
One structure that I like is: 1/4 to spend, 1/4 to save (with a set goal), 1/4 to a charity and 1/4 directly into a college fund. A savings account is a great way to start, however, you might also consider Coverdell Education Savings Accounts (ESA).
If a job for your teenager isn’t a perfect fit for your situation, maybe volunteering is an option in your area. I know the Contra Costa Food Bank, for example, is always looking for volunteers to sort food. It’s a pretty simple job and they encourage groups. Try getting together a “team” of kids to help!
If your child is too young for a “real” job, there are still ways to get your child started learning about responsibility, income and smart money habits. Depending on your child’s age, you may think about weekly chores, yard care for neighbors or babysitting for family or friends. Every child and family is different, but here are a couple of age-appropriate job ideas:
Clean up toys
Watering plants, help with gardening
Check the mail
Dirty clothes to hamper
Collecting coins for a piggybank
Set the table and clear the table(avoid breakables)
Return clean clothes to drawers
Grow plants from seedlings
Help with siblings
Wash and put away dishes
Pet sitting for neighbors
Our friendly member service representatives can help you start a savings account to suit you and your child. A strong work ethic and good money habits are lessons that start early, but last a lifetime.
by Barbara, Vice President, Human Resources