smart spending

5 money lessons for new college graduates

They need a financial safety net because there are so many financial crises that could arise, she says. It's not glamorous, but Costa thinks grads should put their cash graduation gifts in the emergency fund.

Get insured. Graduates may be tempted to save a few bucks by skipping health insurance coverage. But that could be a big mistake, Kobliner says.

"The No. 1 cause of bankruptcy is an unexpected medical emergency, and people in their 20s are the least-insured group in the country," Kobliner says.

The new health care reform law allows children to stay on their parents' plans until their 26th birthday. Some states let you keep the family plan until you're 30. But at the very least, graduates should get a catastrophic insurance plan to avoid drowning in medical bills, Kobliner says.

Yankee advises new graduates to get renters, disability and umbrella liability insurance to protect themselves against other financial catastrophes.

Renters insurance covers belongings if something happens inside your apartment. Disability insurance offers financial help if you suddenly become disabled.

Meanwhile, a personal umbrella liability policy will protect you if you are sued and found to be liable for damages. For example, if you get into a car accident and someone is killed, you could be sued for an amount above and beyond your automotive liability coverage. In such cases, your wages could be garnished for the rest of your life.

"Some horrible mistake that was not intended could devastate your future unless you've done something as simple as purchase an umbrella liability policy for only about $150 per year," Yankee says.

Manage debt wisely. Graduates should pay off their highest-rate debt, such as credit cards, first, Kobliner says. Credit cards typically carry 14 percent interest rates while student loans carry interest rates around 7 percent.

"If a graduate ever can't pay off her credit card bill, she needs to re-evaluate how she's spending her money and whether she's living within her means," Costa says.

Meanwhile, Kobliner thinks that grads with student loan debt should consider income-based repayment, which ties monthly payment to income and not total debt.

Costa and Yankee advise consolidating student loan debt. It can lower the monthly payment and it's easier to manage just one payment every month.

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