New graduates can’t afford to be clueless about their personal finances
This graduation season, I have two nieces finishing master’s degree programs and a nephew about to head off to college. Those of us who have long since hung our diplomas on the wall know that for those leaving college or high school, graduation is just the beginning. There’s still so much to learn.
I love working with young folks and many ask me to help them with their personal finances. But it’s exasperating when they can’t answer basic questions.
Every question I asked one high school graduate about his college expenses was met with “I don’t know.’’
Out of frustration, I finally said to him: “I’m going to need you to know.’’
We have a great higher education system in this country, but where it fails is educating young adults about personal finance. That job first belongs to the people raising the graduates. However, higher education institutions, which have no problem encouraging students to take out loans, also have a responsibility to teach them how to manage their money so they can pay back those loans.
So let me pass along just a few things you need to know, dear graduates:
■ Don’t listen to the collective “they’’ when it comes to finances, particularly since “they’’ often have a biased interest. For example, they may say you are throwing away your money if you rent. They may say, don’t worry about paying college debt fast because it’s good debt.
They are wrong.
You are not a financial failure if you rent until you can truly afford to buy a home. There is no good debt or bad debt. All debt enslaves you to the lender. If you are borrowing to go to college, live at home if that’s a viable option.
■ If you’re headed to college, don’t borrow a single penny until you’ve figured out what the total amount borrowing will cost you each month after you graduate. Finaid.org has a great online loan calculator. Use it before you borrow.
■ If you are finishing college and didn’t follow the previous advice, go to www.nslds.ed.gov and get information about your federal loans. If you have private loans, contact the lender to be sure you are clear on what you owe.
■ Stop saying you don’t know how to budget. There are so many free tools available to help you learn. Try www.mint.com. Another good site is www.smartaboutmoney.org.
■Learn about compound interest. At www.choosetosave.org, watch the 30-second video about compound interest.
■ You can never stop learning about personal finance. Regularly read the business section of your local paper. Or with some of that graduation money get a subscription to a consumer or personal finance magazine. To become a good money manager, you’re going have to stay in study mode.
Part of becoming an adult is putting away childish ways. Children can easily say they don’t know because they don’t always have to know. But by the time you graduate, you can no longer afford to say, “I don’t know.’’
Michelle Singletary is a columnist for The Washington Post. 
