What to Buy Graduates
If someone you know is celebrating a graduation, it's a great time to buy them a gift. We talk about 3 great graduation gifts that will help both you and the graduate feel good:
1. Give cash or an investment. If you're older than the graduate by a generation (or two or three) and you seem to have more money than they do, it's a great time to give the gift of cash. Since graduating seniors may not be the most mature and you might not want all that money going to spending, it's also a great time to get them either an I-bond or open a Roth IRA account for them (if they have earned income.)
2. Give the gift of advice. While unsolicited advice is generally unwelcome advice, transition times like graduation are times where it might actually help. As anyone who remembers the movie The Graduate will understand, John and Bridget's advice includes plastics.
3. Give gifts that help you memorialize or create memories. Photo collages or post-graduation fishing trips are examples of ideas that help everyone feel good and create even more memories.
John: What to get the graduate for a gift for their graduation party - that's what we're going to talk about on today's episode of Friends Talk Financial Planning. Hi. I'm John Scherer, and I run a fee-only financial planning practice in Middleton, Wisconsin.
Bridget: And I'm Bridget Sullivan Mermel. And I've got a feeling financial planning practice in Chicago, Illinois. John, graduation parties are happening now, and a lot of people don't want to go empty handed. So, we try to figure out what to buy graduates. And I have some…I've done some research on gift giving. And so I have a way to think about this that I think might help some people.
John: I think this is great. I've got four graduation parties coming up. And as you know, this is not my forte. Right. So I'm really interested in hearing about what to give, and how to think about it. Right?
Bridget: Yeah, right.
John: That's the big thing for me. What advice do you give to folks?
Bridget: If you're older and you are going to a graduation party, so you're the next generation older than the graduate, the way to think about it is giving the person something that you've got more of than they have. So, for instance, often the older person has more money. And the other thing the older person might have is more experience. So if you go to a party and you are in the situation where you're like the older relative or the Godfather or the Godmother or et cetera, and you've got more money than the other person, then giving cash…it's a great time to give cash. So it's not - other times, Valentine's Day is a bad day to give cash [laughter] but graduation is a good day to give cash. So the first thing is cash. And then the second thing is if you want to give money or start an investment account for them, that's another way. If you want to get fancier, if you're not really that comfortable with just giving them a card with a whole bunch of cash in it.
John: Yeah. Well, that's great. I smile, because that's the first thing I’d do “All right. Stick a check in the envelope” I can do that, and I think “oh, is that what you should do?” And then the other thing also, and thanks for bringing that up, on the idea of an investment. One thing, cash can be spent on: tattoos or other things.
John: And so if you say, listen, setting up habits like two of the things I think about when it comes to an investment is if the person is working, you can put money into a Roth IRA for them.
Bridget: Right, yeah.
John: …long term retirement savings, that sort of thing. And then the other thing is “I bonds”, which you buy through Treasury direct right, from the government, that pay an interest rate. And one of the nice things about those is it's locked up at least for a year. There are some surrender penalties in the first five years, so it gives some kind of restrictions but it does some savings and maybe helps to establish some habits and the environment around savings. So that's what I think about when it comes to cash.
Bridget: Right, and I would say the I bonds might be more appropriate if you're thinking “Yeah, you know, I want to help them buy their first house” or “I want to help them go to grad school,” whereas a Roth IRA might be good if you're thinking “I want to help them long term”, like this will be good for their retirement, or they will really like this in the very long term.
John: Yeah. Yeah, that's great. That's great for those two differentiators. And so the cash - well, that's good, like it’s something “Oh, good. I'm not doing it wrong.” Right. Like that's okay…
Bridget: Yeah, cash is fine. There's no problem with cash. The thing is that sometimes people want it a little bit more complicated because they know that maturity isn't necessarily the strong point of every graduate. And it can be kind of exhilarating to graduate, too. And so sometimes people spend more in that exhilaration, too.
John: Yeah. And then I'm interested in more - and you've done so much research on this. What about other thoughts after cash? What about other things that would be good gifts for grads?
Bridget: I have two other pieces of advice. First one is advice. So remember The Graduate [laughter]
John: Oh the movie The Graduate?
Bridget: Yeah. The Graduate. And so revisiting that you can do that if you want. But remember the guy who, the family friend, who says to Benjamin, “I've got one thing to save you, Plastics”. At the time, the way that I took that when I saw the movie, I was like “this guy doesn't know where Benjamin is coming from at all.” But now, actually, if you look at what's happened with Plastics instead, he was paid. It wasn't horrible advice. Maybe not the most environmentally PC, but it wasn't terrible advice. Giving people…it is the time you have more life experience. And so it's a good time to pass that along. So even in a card or what have you it's a great time to pass that along. So if you have more life experience than the person, people don't really like unsolicited advice in life, but this might be a good time to give it.
John: Kind of like, giving cash on Valentine's Day; inappropriate, right? This is a time when giving advice would actually be appropriate as somebody launches into their next part of their life. That's really an interesting thought. That's great.
Bridget: And then the other thing I'd like to say is say you're not in the position to - say you're a family friend, but you're not - or you’re a roommate, something like that. The other thing that I think is good is like sentimental gifts, that if you've got an excess of caring, like if you've been helping care for this person and you want to give them a gift, but say they're graduating from an expensive school and they're going on to make a lot of money. And you're not in that position. You might not really feel that comfortable, feel like it's necessary to give a gift of cash, because they're not going to be in need of cash. So in that case, something sentimentally caring is a great idea. Same with if you're a peer, sentimentally caring is great. Like pictures of your time together. I'm sorry. I had a pause because I was thinking about my college years, the pictures of my college years. Anyway, so yeah, pictures of time together, something sentimental. It's a great time for that, because, again, it's a time of transition where you're moving from where you've been at to the next thing. And so it's not a bad time to celebrate where you've been.
John: So that was really interesting when it took you back to some of those pictures. Like, think about how meaningful that is…for you and I, college is a long time ago. It's still those things. Like, what kind of meaning is in there? That's really neat. I'll just add a corollary to that is experiences can be an offshoot of those personal, sentimental things that at this stage for a lot of graduates, they're not starting their jobs if they're college graduates right away or they're not going to college if they’re high school graduates. And maybe here's a time where there's several weeks or months where you could share experiences, where you could intentionally go to create some of those memories that will cause you to think back on them with fond memories decades down the road. So thinking about a weekend together and whether it's camping or other things like we talked about on our vacation and travel episode, like those sorts of things could be really meaningful gifts for a graduate at this time of the year.
Bridget: Yeah. So to wrap it up, our three tips for what to give college graduates are: cash or investments, advice, and sentimental gifts and experiences.
John: Yeah, that's great. And if people are interested in talking with advisors who think in this direction, help their clients with these sorts of things, both Bridget and I are members of the Alliance of Comprehensive Planners. And so you can go to ACPlanners.org, and find an advisor in your area that helps clients with these holistic issues.
Bridget: And don't forget to subscribe!
John: That’s right.
Bridget: Subscribe to our YouTube channel, Friends Talk Financial Planning. You get notified if you turn on the notifications, but it helps us. So it helps us if you subscribe, because it helps us with our credibility with YouTube and helps more people find us. So with that, thanks, John.
John: Alright. Thanks, Bridget.
At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.