Grads: Do as Your Parents Didn't

The message to the class of 1997 comes through loud and clear: "Save, save, save."

"Most graduates are quite euphoric about getting a new job, and a weekly paycheck," says Gary Schatsky, a fee-only financial planner in New York.

"The inclination is to spend, sometimes with reckless abandon. But what graduates need to do is to take an inventory of where they are in financial terms, pay off debts, and start setting money aside for the future."

While the US economy looks bullish and continues to create new jobs, newcomers are not immune from corporate downsizing, Mr. Schatsky says.

"Most young people today agree that they should save," says John Sharry, managing director of Phoenix Duff & Phelps, the investment arm of Phoenix Insurance of Hartford, Conn.

But good intentions, Mr. Sharry says, no longer suffice. They're going to have to grit their teeth and actually do it, he says.

The reason starts at home: Mom and Dad are now determined to boot matriculated offspring out of the house, according to a survey by Phoenix Life.

The findings show many parents, scrambling for their own retirement, are reducing financial help for adult children. Baby-boomer parents themselves have been questionable role models, more willing to spend than to save.

* Only 20 percent of parents now supporting college-age kids say they will continue after graduation. That's down from 28 percent last year.

* Only 62 percent plan to help their children buy a car, down from 67 percent last year.

* Only 27 percent plan to help with a home,. a drop from 33 percent last year.

Today's college grads, Sharry says, are stepping into a robust, growing economy. But most don't know how to set up a budget and savings plan, he says.

While 90 percent of graduates understand the importance of saving, only 9 percent understand compound interest, he says. Only 45 percent understand the concept of a budget. And while 60 percent of college graduates have credit cards, only 29 percent understand the credit system.

These findings are surprising since "most of the students [in the survey] come from middle-class to upper-middle-class homes," says Craig Bloomquist of Yankelovich Partners, which polled more than 1,200 students for Phoenix.

Still, says Mr. Bloomquist, today's students are "far more entrepreneurial than their parents."

They do not believe, says Sharry, that their futures are "up to a company or a government."

What young people need now, he says, is to put a savings plan into practice. Five tips from Phoenix for moving from diploma to paycheck:

Clear your debt. Many students finance their college life with credit cards. Now's the time to stop. Find a low interest credit card and try to confine its use to travel and emergencies.

Track your expenses. For one month, write down everything you spend. That tells you where you can save.

Save your money. Build an emergency fund of three month's salary. Then start a long-term savings/investment plan. You could be a millionaire by age 65 if, at 21, you save $25 a week at 10 percent interest. That's the wonder of compound interest.

Plan for retirement. If your company has a 401(k) plan, use it to the max. Open an individual retirement account if you can.

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