Congratulations to all the new graduates! No more cramming for exams, living in cramped quarters, or eating bad cafeteria food. You’ve got a lot to look forward to. But you might also be feeling a little stressed about your future and finances, especially when it comes to how you manage money.
How you handle money over the next few years is incredibly important. If you learn some fundamental rules of personal finance now, applying them will set you up for a lifetime of financial success.
Here are six tips to help new graduates (or anyone who wants money advice) manage money.
6 Tips for College Grads to Manage Money Like a Grownup
- Set up the best bank accounts.
- Build your emergency fund.
- Understand your student loans.
- Know how to build great credit.
- Avoid dangerous debts.
- Start investing sooner rather than later.
Let's take a look at how each tip that can help anyone get a leg up on their financial future.
1. Have the best bank accounts.
One of the first things you should do after graduating is make sure you have great checking and savings accounts. The accounts that you had while in school might not be the best ones to keep.
Bank accounts lay a foundation for your money management system, so they need to give you lots of benefits. Look for a bank or credit union that offers
- A great mobile app
- No monthly fees
- Easy transfers
- Free bill pay, and
- Remote deposits
Visit Bankrate to compare the best FDIC-insured accounts available for your location or nationwide. I’m a huge fan of USAA, which operates only online, offers military benefits, and has a best-in-class mobile app. Shop around to see what makes sense for your lifestyle and financial situation.
2. Build your emergency fund.
Learning how to handle money wisely can be challenging for new graduates. My best advice for starting off on the right financial foot is to begin building an emergency fund with your very first paycheck.
If you can set aside small amounts over time, such as $100 a month, you’ll have more than $1,000 in a year. You’ll be prepared for unexpected expenses, such as car repairs, last-minute travel, or medical bills that aren’t covered by insurance.
Think of an emergency fund as an investment in yourself. It’s how you’ll stay calm and cool in the face of a potential crisis like losing your job.
Make a goal to slowly accumulate at least three to six months’ worth of your living expenses in a savings account. Consider saving 5% to 10% of your income until you reach that goal.
Think of an emergency fund as an investment in yourself. It’s how you’ll stay calm and cool in the face of a potential crisis like losing your job. Once you start building a cash reserve, don’t touch it unless you face a serious financial crisis. Emergency funds are not for shopping, going on vacation, or anything else that you could truly survive without.
So, no matter how much or how little money you start earning, make building a cash reserve a top priority. Being financially responsible means never, ever getting caught without an emergency fund.