An economic survival guide for recent college grads

Expert advice for Generation Y, which will likely have tougher time financially than their parents did.

By Chris Gaylord | Staff writer of The Christian Science Monitor

from the April 23, 2007 edition

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At Johns Hopkins University in Baltimore, arguably one of best research colleges in the country, professors normally don't have to assume their students are clueless about the subject matter. But Stuart Ritter, who teaches the school's undergraduate personal finance course, has found it's best to start from scratch.

"Before taking the class, most of them didn't know anything [about managing their own finances]," says Mr. Ritter. "It's not that they had misconceptions – they didn't know where to start."

With graduation around the corner, college seniors are heading toward a summer that could be both thrilling and daunting. It'll be a time of first paychecks and new apartments, but also of unexpected expenses and new responsibilities.

When it comes to managing money, where do you start?

While the key lesson is an old one – save! – those first few years in the "real world" are also about adopting money-savvy habits that many students have never needed. And, with Generation Y saddled with more loan debt than ever before, many financial planners warn that the common pitfalls will be less forgiving than in their parent's day.

"People in their 20s are in a unique stage of their lives," says Brian Jones, author of "Getting Started – The Financial Guide for a Younger Generation." "If they plan well now and start saving, their finances will be much easier in the future. But for the most part, this crucial time is wasted."

Since most students' expenses are covered by loans, credit cards, or "the Bank of Mom and Dad," many financial planners agree that graduates need to take their first adult steps carefully.

In 2006, the average total debt among Americans aged 22 to 29 rose to $16,120 – up $1,475 from 2001. In those five years, the average number of late payments increased by one-third, according to an analysis of 3 million financial records by credit reporting company Experian Group and USA Today.

Budgeting monthly expenses is the best way to pay off debts and avoid them in the future, says Emily Wood, a certified financial planner (CFP) for Grimes & Company in Westborough, Mass.

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