Fiscal Awareness A Bonus

OCEAN CITY – Thanks to this summer’s drumbeat of scary economic headlines, graduates now entering the workforce are well aware of the financial challenges they face. That’s not a bad thing.

Fiscal awareness among recent grads can spur them toward financial preparedness — and independence — as they embark on their careers. And you can help. When a child or grandchild reaches out to family about such goals as buying a home, investing, starting a small company or even how to get retirement planning started, there are both emotional and financial dividends.

"One of the responsibilities of adulthood is managing your own wealth — and learning just what that means,” says Merrill Lynch Director of Education Savings Chuck Toth.

But many young adults starting out in their first real jobs are so caught up in getting ahead on the job that they often put off making decisions about how to save and invest their first salaries. Any parent, mentor or friend can perform a huge service by introducing them to some key concepts — and maybe even setting up a meeting with a financial advisor. Below are some valuable pointers to pass on to recent grads in your family.

Ask yourself important “life-goal” questions. Having clear goals makes it easier to stay focused on the future and shape a financial strategy.

Your greatest asset is time. Conversations with novice investors often start by impressing on them the attractiveness of compounding benefits over the long term.

Appreciate the upside of risk. Because most of their financial goals are not immediate, younger people in general can afford to invest aggressively.

Consider building a portfolio with dollar-cost averaging. Investing a set amount of capital at regular intervals not only helps an individual build the discipline of saving, but also takes the emotion out of buying equities.

Maximize the power of savings. The possible tax advantages of extra savings accounts, such as a traditional or Roth IRA, are also important for the 25-and-under set to understand.

Get a retirement reality check. To people just entering the workforce, retirement may feel so far off that it’s difficult for them to commit more than the minimum to this lifelong savings goal. But this generation is unlikely to find traditional pensions or substantial Social Security benefits waiting for them at the end of a career.

No matter what the young generations dreams are, the rules remain the same: Work hard, plan well.

(A Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-8520.)