smart spending

5 money lessons for new college graduates

A jar with pennies in it reading, "coins for college"
Highlights
  • Protecting a credit score vital to getting an apartment, new job.
  • It's never too early to start saving for retirement and other needs.
  • Cutting back on insurance could be a costly mistake.

Many college graduates do not have a clue about how to manage their money.

Instead, it's more likely they will use credit cards like cash, take on an auto loan they can't afford or blow their first few paychecks at the mall.

However, that doesn't have to be the case. Instead, money experts offer five tips to help keep new college graduates out of financial trouble.

Protect your credit score. New graduates need to be aware of the dangers of a poor credit score.

Compare rates at Bankrate
Looking for the best insurance, auto loan, or checking account rates? Find those rates and more using Bankrate's rate search tool.

Bad credit can make it difficult to get a good job or approval for an apartment lease. Employers and leasing offices run credit checks, says Cheryl Costa, a Certified Financial Planner and managing director of the Boston-area offices of AFW Wealth Advisors.

Paying bills on time is one key way to protect a credit score.

"Missing even a single bill payment means you'll not only get hit with fees, but you'll see your score plunge," says Beth Kobliner, author of "Get a Financial Life: Personal Finance in Your Twenties and Thirties."

For this reason, she suggests setting up automatic payment for regular expenses like the phone and electric bill.

Make a budget and stick to it. Avoid the temptation to ratchet up your lifestyle simply because a new job has boosted cash flow.

"The easiest way to get into the frugal mindset is to just keep living like a student," Kobliner says.

Kobliner even recommends living at home for a year to save money, although she and Costa agree that parents should charge their children some rent and maybe a fee for the food they eat.

"Just owing a couple hundred bucks a month over time is good discipline," Costa says.

Costa also urges new graduates to make a list of everything on which they're currently spending money. If there's nothing left over to save at the end of the month, go back to the drawing board and cut some expenses.

Jon Yankee, a Certified Financial Planner with Fox, Joss & Yankee, a fee-only financial planning firm in Reston, Va., recommends budgeting in some "fun money" to avoid spending too much when going out. However, it's important to limit splurges.

"Graduates shouldn't fool themselves into thinking that they're entitled to go out two or three times a week," Costa says.

Start saving. When it comes to retirement saving, the message is simple: Start soon.

"Graduates should certainly contribute to their employer's 401(k) if there's a company match and even if there isn't," Costa says.

advertisement

Ideally, graduates should save 10 percent of their income per year, she says.

Besides saving for retirement, grads need to build an emergency fund that's worth three to six months of living expenses, Costa says.

Show Bankrate's community sharing policy
          Connect with us
MORTGAGE HOME EQUITY AUTO CDs CREDIT CARDS
Product Rate Change Last week
30 year fixed, 0 point 4.41%  0.03 4.44%
15 year fixed, 0 point 3.33%  0.02 3.31%
5/1 ARM 3.34%  0.21 3.55%
 
View Rates in your area Search
Product Rate Change Last week
30K FICO-based HELOC 4.75% --0.00 4.75%
50K FICO-based HELOC 4.51%  0.01 4.50%
100K FICO-based HELOC 4.24% --0.00 4.24%
 
View Rates in your area Search
Product Rate Change Last week
60 month used car loan 2.86%  0.23 3.09%
48 month used car loan 2.79%  0.42 3.21%
60 month new car loan 2.94%  0.04 2.98%
 
View Rates in your area Search
Product Rate Change Last week
1 Year CD 0.89%  0.01 0.88%
2 Year CD 1.01%  0.02 1.03%
5 Year CD 1.59%  0.01 1.60%
 
View Rates in your area Search
Product Rate Change Last week
Balance Transfer Cards 15.71%  0.01 15.70%
Cash Back Cards 16.36% --0.00 16.36%
Low Interest Cards 10.91% --0.00 10.91%
 
Search
advertisement
FRUGAL NEWSLETTER

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

advertisement
Partner Center
advertisement

Connect with us