It’s college graduation season. Once you graduate, you are officially an adult. Adulting comes with a lot of responsibility, especially financial responsibility (such as debt management). Therefore it is worthwhile discussing some of the important money lessons for college graduates.
Money Lessons for College Graduates
The reality is, despite having earned a college degree, the majority of graduates have little to no knowledge of how to manage finances. Therefore, understanding the basics of personal financial literacy is key to survive.
These money lessons for college graduates are important not only because the real world awaits them, but because they are walking out of school wondering how to repay student loans.
Get Out of Debt Early On
Get out of debt as early as you can. Typically, student loan debt is considered good debt. However, it is important to begin paying it down as soon as you possibly can. While it may seem tempting to defer your loans or pay the absolute minimum, you will accumulate too much debt in the long run from mounting interest and other expenses that may arise.
Protect Your Credit Profile
Your credit score allows lenders to measure your ability to handle your money and repay your debts. This ability determines the interest rates you pay for your car, mortgage, credit cards and in some instances rent. You can build good credit simply by paying your credit card debt off on time and in full. By practicing this, you can save thousands in interest payments over the long run.
Set Aside Some Money for Retirement
Setting aside money for retirement is one of the more important money lessons for college graduates. This is simply because retirement usually is the last thing on a fresh graduate’s mind. Do not ignore an employee-sponsored 401(k). This lets you purchase stocks, bonds, and mutual funds with pre-tax dollars. This money can compound for decades without your having to pay a dime in taxes.
Create an Emergency Fund
For many grads just starting out, there is barely enough left in their paycheck at the end of the week to buy gas. So, setting aside money for an emergency fund may be unrealistic. However, saving even as little as $5 per week can pay itself back dividends should the unexpected occur – job loss, medical bill, or your car breaking down.
Once you begin making more money, start setting aside the recommended 10 to 15 percent of your paycheck until you reach three to six months of savings to cover major bills and living expenses. Once you reach this milestone, continue the same amount but apply it towards your retirement.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.