One of the greatest financial milestones of a young person’s life is paying for college. Many students spend three to five years in college, working less than full time if at all, and paying tens of thousands of dollars for the privilege. Once graduated, it is common to have loans to pay off and next to nothing in the bank account.
When you begin planning for the expenses of college, don’t neglect to open a post-grad savings account. Graduates generally have to make all of the payments that working adults do, all while looking for work or relocating for a job. Loans don’t cover such expenses. Money you have saved up will.
Saving money for life after college requires the following:
1. Setting Money Aside for an Emergency Fund
During the financially uncertain post-grad years, it is essential to have an emergency fund . An emergency fund should be your priority because the expenses it covers are the type that you cannot avoid without serious consequence.
For instance, your emergency fund may be used to cover the first few loan payments while job searching. Not paying off loans when they come due may seem simple (many would say to defer them), but that interest will add up, costing you thousands more in the long term.
2. Managing the Money You Do Have In College
You probably have a little money, even as a college student. You might be earning it at a part time job or through a work-study program. Perhaps your money has been given as a gift or was earned through summer jobs. Whatever the case, it’s likely that you have something to live on.
While you shouldn’t wear your budget too thin, chances are that if you manage the money you already have wisely, you will have money to live off when you graduate. Start by opening a free checking and savings account that pay you interest.
Websites like Money Tips offer further advice on the types of accounts to open before, during, and after college. Be sure to research how to use such accounts before opening any, though. Different accounts have specific uses for optimal savings and investments. The best option for you will depend on your specific situation.
3. Calculate Return on Investment When You Make Purchases
While in college, it’s easy to feel as if certain things are essential for your success. Whether it’s a new car to transport you to an internship or a highly-rated computer that can perform more functions than you’ll ever need, the chances are that there are cheaper options.
Of course, the cheaper option might be much riskier and less convenient. To figure out what the best choice is for you practically and financially, calculate what the return on investment (ROI) of your major purchases will be. This will let you know how long it will take for your investment to be paid off as well as how worthwhile the purchase is practically.