Is that graduation money burning a hole in your pocket? In this article, we offer eight suggestions for how you can use it wisely!
Graduation money is one of those treats that most high school seniors can look forward to. And while the first instinct might be to splurge on something, you should consider the power that that chunk of change can give you.
You can use your graduation money for the start of something truly wonderful. In the article ahead, we’re going to cover the eight best things that you can do with it. And don’t worry, not all of what we suggest will be boring old grown-up stuff.
That said, it’s our hope that you can use any future windfall to set yourself up for a better future. With that said, let’s begin!
1. Start Your Emergency Fund
When young people start to earn an income, they are often faced with a number of new expenses. These can include costs such as rent, utilities, transportation, and insurance.
In addition, a young person may also have debt from student loans or credit cards. The average age for these expenses to occur is between 22 and 26 years old. In order to manage these costs, it is important to establish an emergency fund.
This should be an amount of money that can cover three to six months of living expenses in the event of a job loss or unexpected expense. The right amount of money to have in an emergency fund will vary depending on a person’s financial situation.
However, most experts agree that a good rule of thumb is to have at least half a year’s worth of your essential living expenses handy. As a freshman in college, that won’t be a heck of a lot.
It could be as little as a car payment, insurance payment, and groceries times three, four, five, or six. It’s basically whatever you’re comfortable with until you can establish a recurring stream of income.
2. Eliminate Any High-Interest Debts
There is no definitive answer to the question of what percentage is considered a high-interest debt. This is because the amount of interest you are required to pay on the debt will vary depending on the type of loan you have and the terms of your repayment plan.
For example, a student loan may have a lower interest rate than a credit card debt, but you may be required to make payments over a longer period of time. As a result, it is important to consider the total amount of interest you will pay over the life of the loan before making a decision about whether or not to consolidate your debts.
There are several types of debts that are commonly considered to be high-interest. These include credit card debts, personal loans, and student loans. At 17 or 18 years of age, you likely haven’t had a chance to rack up any of these. That said, be on your guard against offers that sound too good to be true.
Credit cards are great until you get that first bill in the mail with no money to pay it. Think hard before you pursue one.
3. Limit What You Borrow in Student Loans
For many students, loans are a necessary part of financing their education. However, it is important to remember that loans must be repaid, with interest. As a result, it is important to limit the number of loans that you take out.
One way to do this is to research scholarships and grants. There are many organizations that offer financial assistance to students, and these can help to reduce the number of loans that you need to take out.
Another way to limit your loan debt is to work while you are in school. This can help you cover some of your expenses, and it can also help you build up savings that can be used to pay off your loans after graduation.
Finally, be sure to shop around for loans. There are many different lenders, and you can use this to your advantage rather than accepting the first offer you receive.
4. Buy a Car
Though commonly overlooked, a car can actually be a great investment. For one thing, a car can save you a lot of money on transportation costs.
If you live in a city, the cost of gas and parking can add up quickly. Even if you take public transportation, you will likely still need to spend money on a taxi or Uber occasionally. A car can help you avoid these additional costs.
In addition, a car can be a wise investment because it can give you more freedom to work and earn extra money. Potential employers will think of you as reliable, and you will be one of the first people they think of when divvying up hours.
5. Invest It
Many experts recommend investing in a mix of stocks, bonds, and cash. Stocks have the potential to offer higher returns than bonds or cash, but they also come with more risk.
Bonds tend to be less volatile than stocks, but they usually provide lower returns. Cash investments, such as certificates of deposit and money market accounts, offer stability and modest returns.
There are many reasons why you should start investing your money as soon as possible. The earlier you start, the longer you have to take advantage of compounding. Compounding is the process of earning interest on your investment earnings over time.
For example, suppose you invest $1,000 and earn 10% annually. After one year, you will have earned $100 in interest. If you reinvest that money, you will now earn interest on $1,100. This process can continue over time, and it can have a dramatic impact on your overall returns.
Investing is also a great way to prepare for retirement. Many people find that they need more than Social Security to live comfortably in retirement. By investing your money at a young age, you’ll have much less stress as you near retirement age.
6. Invest in Your Career
While it may seem like a luxury, investing in your career is actually a smart use of your graduation money. After all, your career is likely to be the biggest source of income over your lifetime.
Consequently, anything you can do to increase your earnings potential is likely to pay off in the long run. College tuition and fees, specialized training, niche software, and career networking events are all excellent ways to invest in your future.
So don’t wait until your loans are paid off before you start investing in your career. The sooner you get going, the further along you will be!
7. Move
There are many reasons why someone might choose to relocate. Perhaps they have been offered a new job in a different city, or they are looking for a change of scenery. Whatever the reason, there are several important factors to consider before making the move.
One of the most important things to consider is the cost of living in the new location. Will your current salary cover the cost of housing and other essentials? If not, you may need to find a new job or make some lifestyle changes.
Another important consideration is the climate. If you’re moving from a warm climate to a cold climate, you’ll need to factor in the cost of winter clothes and heating bills. And finally, you should research the local culture and customs before making the move.
This could be a great use of your graduation money because it’s sort of like an investment in yourself. Not every part of the country is right for the career you have chosen. In those cases, it’s best to go where the jobs are, even if that means tapping into your nest egg.
8. Take a Trip
Graduating from high school or college is a huge accomplishment that comes with a lot of perks. One of those perks is often a monetary gift from family and friends to help commemorate the occasion.
While most adults will preach that you should save or invest every penny, we’re not going to do that. In fact, it can be a great idea to spend some of that money on a trip. Here’s why.
Travel can be an incredibly enriching experience that broadens your horizons and helps you to see the world from a new perspective. It can also be a great way to bond with friends or family members. And, let’s be honest, it’s a lot more fun than investing in a savings account! So, if you have the opportunity to take a trip, go for it!
Just be sure to budget wisely and set some limits so that you don’t end up going overboard. After all, you don’t want your graduation trip to put you in debt.
You Will Never Regret Spending Graduation Money On These Options
Hopefully, the ideas for how to spend your graduation money listed above will trigger some great ideas of your own. You don’t have to do them all. You can pick a few or even just one.
The important thing is to live your life without regrets realizing that it’s wise to plan for the future even if you must live in the present. Good luck!
Aric Mitchell's work appears regularly here at 4tests.com and across the web for sites, such as The Inquisitr and Life'd. A former high school teacher, his passion for education has only intensified since leaving the classroom. At 4tests, he hopes to continue passing along words of encouragement and study tips to ensure you leave school ready to face an ever-changing world.
