Good news! Employers intend to hire 19.2% more new college graduates in 2007 than they did last year, according to a recent poll by the National Association of Colleges and Employers. As grads enter the job market, terms such as PPO, HMO, POS, PCP, COBRA, FSA, 401(k) and ESPP will be thrown at them, making them long for the carefree days of organic chemistry midterms or philosophy lectures on Rene Descartes. Working through an employee benefit package can be an intimidating experience and most employers do not tend to spoon-feed this information to employees. The best new hires can expect is to be given a link to a variety of Web sites and, perhaps, an 800 number, which when contacted, may direct the caller to another 800 number.
Matriculate in Retention
As this is an initial step into independence, many college grads may be hesitant to ask their parents for help. A third party–like you–who can look at issues from a more detached and informed perspective can be a very appealing alternative.
Much has been written about this generation of baby boomers’ offspring, known as “Generation Y,” this group is regarded as pampered, excessively nurtured, and overly programmed for activities since childhood. The best way to approach them is to show that you are going to make things easier for them. Help them feel independent but, at the same time, spoon feed and guide them through the process.
The benefit to you could be twofold: grateful parents and starting a strong connection to the next generation.
To get started, determine which of your clients’ children are recent college grads, then call the parents and let them know of your value-added service. Get their permission to text their kids with an invitation to learn how to select the best financial options for their situations. Offer to meet with them to help them to understand what their options are and get started with a strong financial foundation for success. It would be best to meet them in person, but you can use e-mail and the phone.
Help your clients’ offspring answer the following questions: How much do they need to set aside to pay off debt? What are their health benefits going to cost? How much do they need for basic necessities? What is a realistic figure for regular savings? And what can they spend on new clothes, cars, or homes? With some concrete answers, their parents will greatly appreciate this service and their children will be off to a stronger start on their financial futures.
The obvious easy win is to help the newly employed determine their contribution rate and allocation to their 401(k) plan, and develop an overall “spending plan.” For many new grads, “budget” may sound too restrictive for their new-found freedom.
Remind them that if they do not have access to an employer-sponsored retirement savings plan, they can consider an Individual Retirement Account (IRA) or, most likely, a Roth IRA.
Here are areas where you can add value that may not be that apparent to your clients and their children.
Easing the Debt Burden
Student loans are no longer exclusive to the working class. Many of your affluent clients are using loans to help fund their children’s education. In fact, 60% of college students finance at least a portion of their education, according to the National Postsecondary Student Aid Study (NPSAS).