Want a memorable graduation gift for a high school or college student? Ditch the fancy pen or jewelry and opt for creative financial gifts. The college graduate of 2024 shoulders an average of $28,950 in student loan debt and high school graduates face ever-increasing college tuition. So, while the kids are alright, they could use financial help. But that doesn’t necessarily mean showering the new graduate in your life with lots of money, especially if you’re crunched for cash yourself.
The best graduation gifts
The best financial gifts improve financial behavior, says Len Hayduchok, president of Dedicated Financial Services in Hamilton, N.J. “Leverage those gifts to teach good financial habits.”
Gen Z will certainly need them. New graduates face slowing job growth even though the job market is generally robust. New AI tools are replacing some entry-level jobs in fields in fields like tech. Graduates must also juggle expensive rent, which has increased by 21% since pre-pandemic levels.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Despite these challenges, this generation has brighter prospects than Millennials did. That generation, which graduated at the height of the Great Recession, spent the next decade trying to make up for lost wages early in their career. Their struggle was so pronounced that a 2018 report from the Federal Reserve Bank of St. Louis determined that those born in the 1980s were at the greatest risk of “becoming a ‘lost generation’ for wealth accumulation.”
Luckily, today’s graduates aren’t destined to share the same fate, especially if parents and grandparents can help them ramp up their money skills and encourage them to save. That’s what the financial graduation gifts that follow aim to do. Besides what you can afford, the new grad’s employment status will also determine which of these gifts you can give.
IRA savings match
There are several places to save your kids' cash that will work for recent high school or college grads. If the college grad in your life has landed a job, building an emergency fund that covers at least three months of living expenses should take priority over all other savings, even retirement. But financial planner Gordon Achtermann of Your Best Path Financial Planning in Fairfax, Va., has a way for you to help your child or grandchild do both while teaching them to save.
He suggests making a pact: For every dollar they put into a savings account, you match it with money in an IRA — up to the annual IRA limit of $7,000 in 2024 — that you set up for them. (You can only contribute to someone’s IRA or Roth if that person has earned income, and those contributions cannot exceed their earnings.)
“If they take money out of the savings for something that is not a real emergency, the IRA payments stop until the money is replenished,” he says. Which is better, a regular IRA or a Roth IRA? “If they don’t need the tax break that a traditional IRA provides, a Roth would be better,” Achtermann says.
Help with debt
Hayduchok suggests a similar pact for paying down debt. Offer to pay a couple of months of their student loan payment, he says, if they put the same amount toward paying off a credit card, According to Best Colleges, the average monthly student loan payment for a borrower with a bachelor’s degree is around $302. For a borrower with an associate degree, the average payment is around $208, while the average payment for master's degree holders is about $688.
And according to National Debt Relief, the average student credit card debt is $3,280.
Financial planning
It seems counterintuitive to give the new graduate, who may have no monetary assets to speak of, a few hours with a financial adviser, but time with a professional can help these young adults start things off on the right foot, says Diane Pearson, a financial adviser with Pearson Financial Planning in Pittsburgh. Pearson has helped new grads evaluate job offers, understand the kinds of insurance they need and determine where they can afford to live.
If they’re considering moving to another city, “we look at the cost of rent and whether they will need to buy a car.” The emphasis, she says, is on financial planning. “If you’ve got a strong foundation, the assets are going to come.”
CD account
Another option is to gift a CD account — or several, if using the CD ladder strategy — to help jump-start a graduate's savings. CD rates are currently high, in many cases over 5%, meaning they'll earn a good bit of interest over time. Gifting your high-school grad a four-year CD means your cash will earn interest from their freshman year of college to their senior year, setting them up for success when they graduate. The best part? They can't access the funds until the CD term is over, a major benefit if you're not stoked on your grad's spending habits.
Use our tool below to compare CD accounts today.
Budgeting app
Nothing helps a young person build a better financial foundation than learning to live within their means. If your finances are also tight, this next gift will be as much of a boon to you as it is to the recipient. We've reviewed the six best budgeting apps, many of which are free. They help users create budgets and track spending, bills and account balances to stay on target. The real gift, however, is spending some time teaching the new grad to use the app, or if it’s new to you, then learn together, says Achtermann.
If you want to avoid technology and get back to the basics, try teaching your recent grad the new 60/30/10 budgeting method.
Related Content
-
Stock Market Today: Dow Dives 1,123 Points After FedMarket participants reacted predictably to a well-telegraphed hawkish turn by the Federal Reserve.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are SayingFederal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
457 Plan Contribution Limits for 2025Retirement plans There are higher 457 plan contribution limits for state and local government workers in 2025 than in 2024.
-
What Does Medicare Not Cover? Seven Things You Should KnowHealthy Living on a Budget Medicare Part A and Part B leave gaps in your healthcare coverage. But Medicare Advantage has problems, too.
-
13 Smart Estate Planning Movesretirement Follow this estate planning checklist for you (and your heirs) to hold on to more of your hard-earned money.
-
Medicare Basics: 11 Things You Need to KnowMedicare There's Medicare Part A, Part B, Part D, Medigap plans, Medicare Advantage plans and so on. We sort out the confusion about signing up for Medicare — and much more.
-
The Seven Worst Assets to Leave Your Kids or Grandkidsinheritance Leaving these assets to your loved ones may be more trouble than it’s worth. Here's how to avoid adding to their grief after you're gone.
-
SEP IRA Contribution Limits for 2024 and 2025SEP IRA A good option for small business owners, SEP IRAs allow individual annual contributions of as much as $69,000 in 2024 and $70,000 in 2025..
-
Roth IRA Contribution Limits for 2024 and 2025Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
-
SIMPLE IRA Contribution Limits for 2024 and 2025simple IRA The SIMPLE IRA contribution limit increased by $500 for 2025. Workers at small businesses can contribute up to $16,500 or $20,000 if 50 or over and $21,750 if 60-63.
