You’ve graduated – Congratulations! Graduation day marks a major milestone in your journey toward adulthood. For the first time in your life, you’ll be truly independent and responsible for making your own decisions, personal and financial. The big question now is – what are you going to do with your college graduation money?
On graduating, most students receive generous cash gifts from relatives and well-wishers. Whether it’s intended to be a reward for the hard work you’ve put in at school, a little something to get you started, or maybe both, you’ve got a decision to make. Should you spend the money on that exciting cruise you’ve been dreaming about for so long or should you use it for more boring stuff like paying off your student loan debt?
Here are some of the smart ways to put your college graduation money to good use to lay a more solid financial future for yourself.
1. Build Your Emergency Fund
Life is unpredictable, and having a financial safety net is important. By its very nature, an emergency can arise at any time. Knowing you have money tucked away in emergency savings can offer peace of mind during unforeseen circumstances. Whether it’s a sudden job loss, unexpected medical bills, or vehicle repair, using your emergency savings to tide you over is far better than having to take a loan or using high-interest credit cards.
Building an emergency fund is not something you should put on the back burner. Sure, you have other expenses to meet but consider setting aside a portion of your graduation money to get started. Keep adding to it regularly to build it up. Finance experts advise aiming for at least three to six months’ worth of living expenses in emergency savings.
The best way to build your emergency fund is to open a savings account in a bank and deposit money into the account regularly. The small amounts you deposit will add up over time and keeping it in the bank means you won’t be as tempted to spend it impulsively.
2. Start Paying Off Your Debts
Your student loan repayments will start six months after graduation day. If you have the money, consider putting some of your college graduation money to paying down part of the debt.
But before you consider prepaying student loans, look into your credit card accounts. Did you buy an expensive laptop or textbook using your credit card and is that amount still outstanding? Credit cards generally have the highest interest rates of all types of debt, so the sooner you reduce those interest payments, the better.
Once you’ve paid off your high-interest debts, plan how you’re going to use the rest of your college graduation money toward your student loan repayments.
3. Open A Savings Account
Aside from your emergency fund account, it’s a good idea to open a savings account in a bank to park your spare cash. A savings account offers several benefits. Your money will be safer in a bank account than leaving it around at home. You won’t be tempted to spend it impulsively but you can access it at an ATM or deposit a check at the bank branch. As a bonus, whatever balance you have in your savings account has the potential to earn interest.
Do your research on the bank to make sure you are getting a decent interest rate and read through the terms and conditions in detail to make sure they suit your requirements.
4. Invest in Yourself
Consider your graduation money as a stepping stone to invest in your skills and professional development. Enroll in an online course or workshop, or look into getting a certification that aligns with your career goals.
Upskilling is becoming increasingly important these days, especially in highly competitive fields. While a bachelor’s degree is usually enough for an entry-level role, upskilling can give you an edge in the job market and open up more lucrative opportunities in the long run.
5. Start Contributing To Retirement Savings
Who even thinks about retiring just after graduation? Retirement may seem like it’s light years away right now, but there are benefits to begin saving for that goal right away. You may not see the value of it now but as you get older, you’ll be glad you started early. Even if it feels small now, consistent savings can add up and work to your benefit over the years.
6. Start Your Own Business
Always wanted to start your own business? One option is to consider using college graduation money to start your own business, whether it’s a side hustle or a passion project. In addition to the time investment, starting any enterprise usually comes with upfront expenses. Your graduation money can help you get started earlier rather than later.
Whether it’s selling handmade crafts online, starting a small service-based business, or monetizing a skill, the extra income may be able to supplement your regular job and provide financial flexibility.
7. Get Proper Insurance Coverage
It’s never too early to get serious about insurance. You never know when you’ll need it and you definitely don’t want to wait until something happens to get insurance. Evaluate your needs and consider purchasing at least health insurance to start with. Oftentimes, health insurance plans are offered through employers. It’s important to be aware of your options. If you have your own vehicle, you’ll also need auto insurance. Adequate coverage can protect you from unexpected expenses down the road.
Most Important Of All – Make A Plan
As you can see there’s a lot you can do with your college graduation money and with a solid plan, there’s a higher chance you’ll make good choices.
Before you spend any of that money, calculate how much you have in total. Then figure out how much to allocate toward paying off debt, saving, and other purposes. This will help you stay on track.
Your college graduation money is an opportunity to set a strong foundation for your financial future. Use it well.
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