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Graduating from college and receiving a bachelor’s degree is as exciting a time as ever, but for many, the excitement is soon tempered by the uncertainty of the future.
Will I find a job that suits me? Will I earn enough money to do things like start a family or purchase a home? Questions like these are common occurrences in the mind of a post-grad.
In the immediate aftermath of graduating, many of the newest degree holders receive temporary relief from the stresses brought on by the future in the form of graduation money.
Graduation money, commonly gifted by the friends and family of the graduate, is meant as both a congratulatory measure and as an aid package to ease the transition into the working world.
With 2018 commencement ceremonies not far behind us, LendEDU wanted to find out what the most recent four-year college graduates were doing with their graduation money, if they were fortunate enough to receive some.
Our subsequent survey revealed the following key findings:
- 48% of 2018 college graduates received graduation money this spring, while 35.3% did not, and 16.7% opted not to say
- Amongst those that did receive money, the average amount received was$1,847.44, while the median amount received was $700
- Amongst those that received money, 28.13% will save it for when it is most needed, 24.58% will use it to pay off debt, and 20% will invest that money
Full Survey Results
(All results derived from an online poll of 1,000 four-year college graduates from the Class of 2018)
1. Upon graduating from a four-year college in 2018, did you receive graduation money from family or friends?
a. 48 percent of respondents answered “Yes”
b. 35.3 percent of respondents answered “No”
c. 16.7 percent of respondents answered “I’d rather not say”
2. (Asked only to those who answered “A” to Q1) How much money did you receive upon graduating?
a. The average amount received was $1,847.44
b. The median amount received was $700.
3. (Asked only to those who answered “A” to Q1) How will you be utilizing that graduation money?
a. 20 percent of respondents answered “Invest it”
b. 24.58 percent of respondents answered “Pay off debt”
c. 11.88 percent of respondents answered “Use it to rent/purchase my first property”
d. 5.83 percent of respondents answered “Spend it on something I always wanted (i.e. golf clubs, clothes)”
e. 4.58 percent of respondents answered “Use it to travel”
f. 28.13 percent of respondents answered “Save it and use it periodically when I really need it”
e. 5 percent of respondents answered “Other”
4. (Asked only to those who answered “A” to Q1 and “A” to Q3) Specifically, how will you invest it?
a. 33.33 percent of respondents answered “Through an online brokerage account”
b. 32.29 percent of respondents answered “Through my financial advisor”
c. 5.21 percent of respondents answered “Through a robo-advisor”
d. 12.5 percent of respondents answered “Through a 401(k)”
e. 16.67 percent of respondents answered “Other”
5. (Asked only to those who answered “A” to Q1 and “B” to Q3) Specifically, what type of debt will you pay off?
a. 59.32 percent of respondents answered “Student loan debt”
b. 28.81 percent of respondents answered “Credit card debt”
c. 5.08 percent of respondents answered “Auto loan debt”
d. 6.78 percent of respondents answered “Other”
Observations & Analysis
Most Grads Getting Money Are Either Playing It Safe, Playing the Market, or Paying Down Debt
480 of the 1,000 college graduates from the Class of 2018 received the gift of money upon their graduation. Amongst these fortunate degree holders, we asked them to specify how they would use their new found cash.
The plurality of respondents, 28.13 percent, indicated that they were going to save their graduation money and use it as needed. When compared to the other answer options provided, this is one of the more conservative plays that recent degree recipients can make with their money. Saving it is far more prudent than spending it on a vacation or a new wardrobe, however, it may be wiser to invest it to try to grow the money longterm, something that a good number of respondents intend to do.
Investing Graduation Money Through an Online Brokerage Account or Financial Advisor is a Popular Route
One-fifth of the poll participants that received graduation money indicated that they want to invest that money in one way or another. This could be interpreted as one of the more financial-savvy moves that graduates who recently came upon a cash windfall could make. While some of our respondents received upwards of $5,000 and others got $500, investing it in the right places could make the starting amount insignificant.
>> Read More: How to start investing
Another possible outcome that originates from investing graduation money is the ability to go on a long vacation or buy a new set of golf-clubs later on thanks to a sound investment strategy. If a recent graduate takes their graduation money and right away spends it on new sneakers, than that might be the end of their spending. But if they invest it, grow it, and then liquidate their profits, the world becomes their oyster.
We asked those 2018 graduates that were investing their graduation money exactly how they were investing it…
Symbolic of both the times we live in and the technological literacy of younger consumers, the plurality of respondents, 33.33 percent, said they would be investing their graduation money through an online brokerage account. Offering low commission fees and sometimes no account minimums, online brokerage accounts have become a very popular way for people to invest in the 21st century.
Interestingly, the more traditional way of investing, through a financial advisor, was just a mere percentage point behind online brokerage accounts in terms of receiving the most votes. This is another great way to invest if you have a trustworthy financial advisor. However, drawbacks include limited or delayed access, high account minimums, and high commission fees.
A bigger surprise from this survey might have been that so few 2018 graduates were intending to invest their money through a robo-advisor. More respondents said they would be investing through their 401(k) or another option not listed than those that wanted to invest through a robo-advisor. With user-friendly smartphone apps, extremely low fees, and often no account minimum, robo-advisors are often thought to be the wave of the future in terms of playing the market. According to this survey however, robo-advisors might not be catching on as quickly as many anticipated.
Not Surprisingly, Paying Down Debt a Popular Choice For Graduates Getting Money
As most consumers may know from experience, there are a plethora of ways to rack up debt. When you survey 1,000 graduates from the Class of 2018, student loan debt is surely going to be a common occurrence.
Amongst the graduates that received a monetary gift upon graduating, paying off debt was the second most common answer when asked what they would do with that money. 24.58 percent of poll participants indicated that they would be paying down debt with the help of the money they received after earning their college diploma.
What kind of debt would they be chipping away at?
In perhaps the least surprising result of the entire survey, the majority, 59.32 percent, of 2018 graduates that would be using their money for student loan repayment.
With the national outstanding student loan debt total at $1.52 trillion and the average student loan debt per borrower currently at $27,975, student debt in the U.S. is at one of its worst levels ever. Using their graduation money, many poll participants are seeking to get a head-start on their student debt and it is hard to blame them.
>> Read More: How to pay off student loans fast
Paying off credit card debt was the second most populated answer, with 28.81 percent of respondents opting to go this route. Considering every respondent to this survey was 24 or younger, one can only hope that they have not racked up too much credit card debt at such a young age. With the average graduation gift size at $1,847.44, putting all of that towards credit card debt should decrease it by a substantial amount.
All of the data that can be found within this report derives from an online poll commissioned by LendEDU and conducted online by online polling company Pollfish. In total, 1,000 Americans between the ages of 18-24 and who graduated from a four-year college in 2018 were surveyed for this poll. The desired respondents were found via screener question and by using Pollfish’s age filtering feature. If they fit the desired criteria, respondents were then selected randomly from Pollfish’s online user panel of over 100 million. This survey was conducted over a 17-day span, starting on June 20, 2018, and ending on July 6, 2018. Respondents were asked to answer all questions truthfully and to the best of their ability.
See more of LendEDU’s Research
Author: Mike Brown