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Miami Herald
2 days ago
- Business
- Miami Herald
The post-grad playbook: How new graduates can prep their finances for success, even in a rough economy
The post-grad playbook: How new graduates can prep their finances for success, even in a rough economy As this year's new college grads receive their sheepskins and throw their caps into the air, jubilation can turn very quickly to trepidation. That's because they are entering the most challenging job market for entry-level employees in years. Current, a consumer fintech banking platform, shares financial tips for new graduates as they navigate a challenging economy. The labor market for new grads "deteriorated noticeably" in the year's first quarter, says the Federal Reserve Bank of New York, with that group's unemployment rate jumping to 5.8%. That's the highest level since the pandemic was at full force back in 2021. Meanwhile, sky-high housing costs mean that young adults often don't have the ability to strike out on their own quite yet. The result: 46% of parents report their adult children (aged 18-35) moving back home, according to a March 2025 study from financial services firm Thrivent. "Housing affordability is a big factor here," says Alex Gonzalez, a financial consultant for Thrivent. "Adult children are moving out later, and marrying later. Often after college they temporarily boomerang back home." And there's nothing wrong with that. In fact, these days especially, it can be the smart financial choice. This transition time can actually be a "great opportunity," says Erin Lowry, personal finance expert and author of the bestselling "Broke Millennial" book series. New grads can take advantage of this period to get their financial lives in order: to build up their credit, put some money away in savings, and get a retirement account started. Then, when they are ready to fully launch out on their own, they will be much better positioned for financial success. Here are a few key planks that make for a strong financial foundation. Building credit One challenge many young adults face is that their credit records aren't yet fully formed, since they haven't had years of payment history. That takes time - and the post-grad period is ideal. "It's a great time to start building that credit score," says Thrivent's Gonzalez. "Even basic things like putting gas on your cards, and then paying it off and avoiding rotating balances. Things like that will help when you eventually apply for car loans or mortgages." These days, consumer fintechs have also opened up new avenues for building your credit. Everyday spending, including your daily expenses from buying groceries to gas to paying your bills, can help you build your credit history. Consumers who build credit using a secured credit card can see an average increase in credit score of 81 points within six months, according to Current's proprietary data. A more robust credit score (anything above 740 is seen as very good) will pay off in multiple ways, such as getting lower interest rates on loans, or even helping secure a new job. Yes, sometimes employers check your credit record. Shoring up savings Whether a young adult living at home should be paying 'rent' is really up to the individual family. But ideally, a new grad would be able to reliably put money away - perhaps to start an emergency fund of a few months' worth of expenses, or to save up for a deposit on a rental apartment or a down payment on a home. As they're doing that, they should make sure their money is working as hard as possible. "Everyone should have high-yield savings," advises Lowry. "If you look at your APY and it's .01% - which is the prevailing rate at many big banks you probably know - then it is time to move. The minimum you should be getting is 3%." That might require some shopping around. But younger savers are likely more comfortable with considering online, mobile-first options anyways, beyond just whatever bank happens to have a physical branch down the block. Opening a retirement account It might only involve small sums at first. But the mere step of opening a retirement fund early - either a 401(k) at a new job, or a traditional or Roth IRA - can make the difference between success or failure for Future You. Doing so in your early 20s - as opposed to your 30s, say - will mean an additional decade of compounded growth. That's a big win Boomerang Kids can lock in right now, even if the initial amounts are modest. Of course the eventual goal for new graduates is to launch out on their own, and become fully financially independent. But the harsh economic reality is, that may not be possible right out of the gate. That's why, according to Pew Research Center, today's young adults are lagging behind earlier generations in reaching major life milestones. By using that post-grad period wisely - building credit history, shoring up savings, and opening retirement accounts - they can dramatically increase their odds at a successful transition later on. Lowry says: "Then, when kids move out, they will have a savings stockpile to help them launch out into the world." This story was produced by Current and reviewed and distributed by Stacker. © Stacker Media, LLC.
Yahoo
3 days ago
- Business
- Yahoo
4 Big Investing Mistakes People Keep Making, According to Erin Lowry
Half of U.S. adults scored low in financial literacy for eight straight years, with confusion costing Americans an estimated $243 billion in 2024 (about $1,015 per person), as reported by The Associated Press. That knowledge gap isn't just academic; it's costing people real money and opportunity. Erin Lowry, author of 'Broke Millennial,' has spent years helping everyday investors cut through the noise. Through her writing and interviews, including a recent conversation on 'The Entrepreneur's Studio' podcast, she's identified some of the most common and costly investing mistakes people make without even realizing it. Read Next: Check Out: Here are the biggest investing missteps Lowry wants you to stop making. One of the most common myths around money is that you need to be good at math to manage your investments well. Lowry said this belief discourages many people from ever learning the basics of investing. In reality, investing doesn't require complex equations. It's more about understanding core ideas like risk, time horizons and compounding than solving for X. According to The Motley Fool, those who don't want to do a lot of math can still be stock market investors and could choose a more passive investment approach. Learn More: But it's not just math that intimidates people; it's the language. Terms like 'asset allocation,' 'index funds' and 'diversification' can sound like they belong in a finance textbook. For many, that's reason enough to check out. Lowry said she believes the industry doesn't always do a great job of welcoming newcomers. 'There is a lot of weird words and jargon that get used in investing that get thrown around,' she said. 'Partially to intimidate dumb money, aka retail investors like you and me.' But behind those words are surprisingly simple ideas. Take 'diversification,' for example. It just means spreading your investments around so you're not putting all your eggs in one basket. Many people are already investing without realizing it. If you have a 401(k) or IRA, you're not just saving; you're investing. But because we call it 'saving for retirement,' many people fail to think of themselves as investors. That can lead to passivity and missed opportunities. Lowry encouraged people to embrace the term 'investing for retirement.' One of the most damaging and overlooked investing mistakes, according to Lowry, is setting up a retirement account but forgetting to actually invest the money. Lowry explained that people can sometimes set up a retirement account but don't know they need to pick investments. She said this can go unnoticed for years, quietly stalling your ability to grow wealth. If your 401(k) or IRA isn't earning much and hasn't changed in value for a while, it's worth double-checking where that money is going. According to SmartAsset, holding too much cash in retirement accounts can reduce your returns and purchasing power, though small cash holdings can provide stability. 'If it says something like cash settlement account, cash fund, money market fund, that's cash,' she said. 'If it hasn't changed much in the last three years, that's cash. Call your brokerage. Make sure it's invested. That's my PSA.' More From GOBankingRates 6 Popular SUVs That Aren't Worth the Cost -- and 6 Affordable Alternatives This article originally appeared on 4 Big Investing Mistakes People Keep Making, According to Erin Lowry
Miami Herald
14-05-2025
- Business
- Miami Herald
Broke Millennial author sends passionate message on 401(k) urgency
Millennials confront mounting financial obstacles that threaten their ability to retire comfortably one day in the future. With rising costs, stagnant wages, and shifting employment trends, many in this generation struggle to build sufficient savings through traditional retirement plans such as 401(k)s and IRAs (Individual Retirement Accounts). Erin Lowry, author of the Broke Millennial series of personal finance books, urges her generational cohort to get started contributing to employer-sponsored 401(k) plans and tax-advantaged IRAs as soon as possible. Don't miss the move: Subscribe to TheStreet's free daily newsletter One of the biggest concerns among millennials is the possibility of outliving their savings. Increasing housing expenses are another major hurdle. Inflation also exacerbates financial insecurity. Millennials feel the strain of rising costs for essentials such as health care, cars and other everyday expenses. Related: Shark Tank's Kevin O'Leary sends strong message on Social Security Student loan debt has further delayed retirement planning for many millennials. The Great Recession of 2008 and the rise of gig economy jobs have disrupted traditional career paths, leaving many without access to employer-sponsored 401(k) plans. In response to these challenges, some millennials are turning to alternative strategies, including aggressive investing, financial independence movements such as FIRE (Financial Independence, Retire Early), and digital tools to optimize savings. However, experts stress the importance of using 401(k)s and IRAs to build long-term financial security. Lowry emphasizes the fact that, as millennials navigate these financial hurdles, the need for proactive retirement planning is increasingly important. In her book Broke Millennial Takes on Investing, Lowry recalls a time at 23 years old when she was talking with a new manager at work. The manager had told her that she could log in to the company's benefits portal and learn about setting up a 401(k) - as well as a pre-tax transit card and health savings account. "I smiled tightly and nodded at my new manager as if I had any idea what she'd just said to me," Lowry wrote. "The term 401(k) sounded familiar, but those other two terms meant nothing." Lowry responded to the experience by educating herself as much and as quickly as she could about retirement planning. She grew in her wealth of knowledge and is now passionate about offering personal finance advice for other millennials. She shares her thoughts in her books, online and in speaking engagements. More on retirement: Dave Ramsey sends strong message to Americans on 401(k)sShark Tank's Kevin O'Leary warns Americans on Social SecurityScott Galloway sounds the alarm on Social Security, boomers She describes a 401(k) contribution example using imaginary names - in this case, Jake and Stacey, with Jake delaying participating in a 401(k) plan for 10 years after Stacey started with hers. "Jake tried to catch up to Stacey after waiting ten years to start contributing to his 401(k)," Lowry wrote. "Stacey contributed only 4 percent of her salary in order to get the employer match. Jake contributed 10 percent, more than double what Stacey did, but he was still $100,000 behind her when they both retired at sixty-two." Related: Shark Tank's Kevin O'Leary makes bold prediction on U.S. economy Lowry strongly argues that people should not delay investing in a 401(k) plan. "Allow me to momentarily stay on my soapbox a bit longer and refer you to the following scenario ... to explain why it's imperative that you start now," she wrote in her book. "Like, 'Put this book down after my rant and go sign up for your 401(k) or open an IRA' kind of now." Then, Lowry explained the hypothetical situation to which she was referring. "Assume twenty-one-year-old Kim saves $300 per month (or $3,600 per year) from now until she retires at age sixty-eight and receives a real rate of return of 4 percent," Lowry wrote. "She would have approximately $500,000 at retirement. If Kim waits ten years to start saving, at thirty-one, she would need to save approximately $500 per month (or $6,000 per year) to achieve the same balance at retirement." "Compound interest," Lowry added. "She's a beautiful, beautiful thing - when she's on your side." Compound interest is the interest calculated on both the initial principal and the accumulated interest from previous periods. It allows savings or investments to grow exponentially over time. Related: Veteran fund manager unveils eye-popping S&P 500 forecast The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
