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The Recent Graduate’s Guide to Saving

Congratulations on graduating from high school! You get a nifty cap to throw in the air, a piece of paper stating your accomplishment, and a whole lot of brand-new adult responsibilities. Whether you’re off to college or about to start your first full-time job, your life is about to change forever. Money certainly isn’t everything, but it is an essential thing. Your credit score is going to matter for a lot longer than the high school GPA you just left behind, so it’s important to get off to the right start and protect your bright future.

Creating a Budget

Being an adult can be really expensive. Everything costs so much money! Razors, paper towels, soap, and snacks, all things that just magically appeared in the house growing up, are all on you now, and these little things add up fast. The first thing you need to do is figure out what expenses are now yours to cover. Are you living at home, in an apartment, or in a dorm? Do you need to cover your cell phone bill, car insurance, or medical bills? Make a list of your expenses. You can either make a budget with paper and pencil or use one of the many budgeting apps available. Apps are great because when you’re debating if you need a latte, you can pull up your budget and remember the reality of your financial situation.

Life happens fast, and you want to be prepared for what life throws at you. After you figure out your budget, start setting financial goals for yourself. An emergency fund is a great first budgeting goal. A $1,000 emergency fund can cover new tires for your car, a speeding ticket, a lost phone, or any small to medium catastrophe that pops up. Saving $1,000 might seem impossible, but you can do it if you start small and stick with it. Simple money-saving hacks like using digital coupons, brown-bagging your lunch, sticking with matinee movie dates, and limiting nights out really do work, and the savings add up fast!

Finding a Job

It’s sad but true: To have money, you have to make money, and that means finding a job. The first thing you need to do is let go of high expectations. Few people start with their dream job, but you need to start gaining work experience somewhere, and you might even be able to move up the ladder to a better position as times goes along.

You’ll also need to make a résumé. Even if you’ve never had a job, most teens have valuable experience they can use as résumé fodder. Babysitting, volunteer work, leadership positions at school, or eight years playing the same sport are all useful experiences and let employers know that you are responsible. Have a trusted adult (someone with work experience who has a full-time job) look over your résumé before you start applying for jobs. Most jobs, even entry-level ones, ask you to apply online, so a great digital résumé in a few different file formats is a must.

Also, networking is vital. Make sure to tell people you know that you’re looking for a job: They just might be able to help you out.

The other important thing you need to do is to make sure that you know where your important documents are. Most employers will want to see things like your driver’s license and Social Security card when they hire you.

Opening Bank Accounts

You have a budget. You have a job. Now, it’s time to get a bank account. Some banks offer low- or no-cost checking for students and young adults, and some even offer bonuses for opening an account. Before you chose a bank, think about what sort of banking you’ll need to do. If all of your money will come in electronically and you do all of your banking online, you don’t necessarily need a branch nearby. If you scored a job earning cash tips, though, you’ll want a close-by branch to deposit your dough. Banking apps are super-important, especially if you live with your phone nearby at all times (like most people do). A great banking app will let you check your balance, send money to people, deposit checks, and even track your budget goals. Make sure you check into what sort of app the bank you are considering offers.

If the idea of going into the bank to open an account makes you anxious, know that some banks will let you open an account online. But even though most of us depend on our debit cards and online bill-paying to handle our money these days, make sure to get some checks. You’d be amazed how many landlords only accept checks! Also, open a savings account at the same time so you can start working on that emergency fund.

Once your accounts are up and running, make it a habit to check the app daily and stay on top of your account balances. Overdraft fees are expensive, can lead to the bank closing your account, and can prevent you from opening bank accounts in the future.

Saving for Retirement

If you’re sticking to your budget, working on building an emergency fund, gainfully employed, and living within your means, congratulations. Now, it’s time to think about retirement. I know: It seems like a long ways off, and you’re probably a lot more concerned with saving up for your first vacation as a working adult. But you need to look out for older you. Thanks to the magic of compound interest, if you invest $2,000 at age 18 at a 7% rate of return, at age 68, that $2,000 would be worth $32,622. Anyone with a job can set up a Roth IRA. Since you’re under 50. you can invest up to $5,500 a year. If that number seems impossible, take a look at your budget and decide what you can start setting aside. Even $10 a week adds up to a lot over time. And remember, your future self will thank you!

Using a Credit Card Responsibly

When used responsibly, credit cards can be a valuable financial tool that can help you to start building a stellar credit score while you are still young. Throughout your financial life, you’ll likely take out a variety of loans, like student loans, mortgages, car loans, or title loans. Establishing a great credit history helps you get good terms on these loans when you need them.

What should you look for in a card? There are several credit cards aimed at college students and other young adults. Try to find a card with a low interest rate, and pay attention to whether there’s an annual fee. The best card might come from the same bank where you have your checking and savings accounts. If all of your accounts are at the same bank, its super-easy to pay off your card by transferring money over from your checking account.

The best way to use a credit card is in tandem with budgeting. Only use your credit card when you have the money to pay it off. That way, you can always pay your balance off in full every month.

Student Loans and Financial Aid

Thinking of going to college or trade school? Congratulations! Now, let’s get you some financial aid. Your first step is to complete the FAFSA. Most newly minted high school graduates will have to complete the form with their parents. Under certain circumstances, like if you are married or have a child, your parents won’t have to complete the form. The FAFSA is a federal form that allows the government to calculate how much and what kind of financial aid you are eligible to get. Grants, if you qualify for them, are fantastic because they don’t have to be paid back. Student loans backed by the federal government come in two different types: subsidized and unsubsidized. The government pays the interest on subsidized loans while you are in school; the interest accrues on unsubsidized loans. Borrow responsibly: Those loans have to be paid back! Only take what you need to pay for classes, lab fees, and maybe books. Don’t borrow money to finance a summer backpacking trip to Thailand or new furniture for your student apartment. Every dollar you borrow limits the choices you’ll be able to make later on. Also remember that you can pay the interest on unsubsidized loans while you are in school, which keeps the interest from compounding and will save you money in the long term.

Filing Tax Returns

Jobs and bank accounts help you enter another phase of adulting: filing taxes. Yes, you have to do it every year. First, you need to coordinate with your parents or anyone else who might claim you as a dependent: If someone else claims you, you can’t claim yourself on your own return.

Every job you worked at in the previous calendar year owes you a W2 by the end of January. As soon as you have all of your W2s, you are ready to start on your tax return. If you’ve been putting money into your IRA, make sure to report that on your taxes. Depending on how much money you made, you might qualify to file your taxes online for free. The deadline to file is April 15. Remember, without a tax return, you won’t be able to fill out next year’s FAFSA. Also, you might get a tax refund! Now that you’ve mastered the art of saving money, you’re sure to put it to good use.

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