Spend or Save Graduation Money?

Did you receive money for graduation and you’re trying to figure out what to do with it? Spend it, save it, invest it… Receiving cash for graduation is a great gift, and when used wisely, can start you off on the right foot financially. While you may be tempted to go on a shopping spree or treat yourself to a getaway, there may be better ways to use your graduation money.

Here Are Five Ways to Use Your Graduation Cash that Gives You a Step in the Right Financial Direction:

1. Set Aside for Savings

One way to put your graduation money gifts to good use is to put money aside for savings or as an emergency fund. Stashing cash in a savings account can help you afford expenses, such as textbooks, meal plans, and more, or toward tuition to reduce your reliance on loans. If this is undergraduate graduation money it can help you afford moving out of your parent’s home.

You also cannot predict the future. Financial setbacks can happen – like having to fix a broken car or an unexpected job loss– that will make it hard to pay your bills. Having an emergency fund can make these unexpected moments easier to live through with less of a chance of having to rely on credit cards or loans.

2. Invest in Yourself

While saving is important, investing in yourself is as well. Sometimes, spending money is the smart move – as long as it’s purposeful. Consider using a portion of your graduation money for items that support your future goals. Here are a few examples:

• A laptop for school or job hunting
• Professional clothing for internships or interviews
• Furniture or kitchen basics for an apartment or dorm room
• Online courses or certifications that align with your career goals

Upskilling is becoming increasingly important these days, especially in highly competitive career fields. While a bachelor’s degree is usually enough for an entry-level role, upskilling can give you a competitive edge that makes you stand out in the job market.

3. Pay down some of your student loan debt

Your student loan repayments will start six months after graduation day. If you have the money, consider putting some of your graduation money into paying down part of the debt. We recommend tackling the student loans with the highest interest first.

By pre-paying your student loans with some of your graduation cash, you could be saving yourself from accumulating interest on interest down the road. Otherwise, once your payments begin, you’ll be paying interest on both the principal and the interest that accrued during the grace period.

4. Invest for your Retirement

Saving for retirement might not be on the top of your mind when you’re young, but the earlier you begin, the better off you’ll be in the future. Even if the contribution is small, consistent savings can add up and work to your benefit over the years. Think of it this way, at an assumed 6% average annual return rate, investing $100 at age 22 will reach $1,226 by age 65. If you stay consistent and add $25 a month to that initial deposit, you’ll have $57,495 by age 65.

5. Treat Yourself

Yes, being financially stable and making sure all of your financial priorities are met is what brings peace to everyone’s life, but nothing beats doing what you want with your money. You just spent countless hours, days, and years working towards this degree. So, if you feel like you need to take a vacation before things start to get real, do it! If you want to splurge on a new wardrobe, buy it! Spending money on things you like is essential for taking care of yourself. Just make sure you take care of the important things first, so you won’t be homeless by the time you come back from that trip.

Planning Ahead is Key

If you’re not sure whether you should spend or save your graduation gift money, it helps to look at the big picture. What are your short-term needs? What are your long-term goals? The answer to how to use your graduation cash is different for everyone, but by considering all of the options, it may be easier to decide how to use graduation money to stay ahead financially.

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