One major perk of graduation season, in addition to receiving the degree you’ve toiled so hard for, in hand, is the celebratory tokens, presents and cash gifts from family and friends.
Those cash gifts can come in handy for a well-deserved splurge, but before you spend it all in one place, consider these five ways to save and invest your cash.
1. Start Your Emergency Fund
As a college student with lean finances, building an emergency fund as you enter the “real world” is critical.
This is one area that I personally could have done better.. After graduating with student loan and credit card debt, I was so focused on getting a jumpstart on paying them off, that I neglected to build up an emergency fund. If any major financial emergencies had popped up, I would have had to take on more debt.
If you are graduating with little to nothing in savings, like I did, consider committing a portion of your cash gifts to start one, even if it’s only $100. Then you can continue contributing with any other extra cash that comes your way, before you start your first full-time job.
2. Fund Your First Retirement Account
The first time I heard about an individual retirement fund (IRA), was when my collegemate mentioned that her parents were gifting her a fully-funded Roth IRA for college graduation. Up until that point, I had no idea that there was an option to start funding your retirement, without an employer-sponsored plan. I never gave IRA’s much thought again, until I started my first full-time job after grad school, but I wished I had started saving in an IRA much sooner.
You can get a head start on saving for retirement and gaining a tax advantage by directing some of your graduation cash to an IRA.
Related Article: How To Start Saving When You Don’t Know Where To Begin
3. Jump Start Your Student Loan Pay Off
Student loans might be the last thing you want to think about after graduation, but getting a handle on how much you owe, who your lenders are and mapping out your own payoff strategy, can set you on the path to pay them off, quickly.
One of the best ways, reduce your total student loan cost (and pocket some of your lender profits at the same time) is to pay off any interest that accrues before the end of your post-graduation grace period. This helps you avoid capitalization on this outstanding interest, which results in the added benefit payments not going to interest on interest.
Funnel some of your cash gifts to help you avoid paying compound interest to your lenders.
4. Set Aside Money for An Apartment Deposit
If you plan to move-in to a new apartment as you relocate for a new job or finally leave the home nest, large deposits may be required. And I should know. During the first year of my first full-time job, after completing graduate school, I moved 4 times and had to come up with a rental deposit for 2 of those 3 moves.
Using your cash gifts, to build up your rental deposit funds is a great way to prepare for those moving related costs.
Related Article: Manage Your Finances After Graduation Using These Steps
5. Establish A Financial Buffer Before Your First Paycheck
If you’ve ever had a part-time job throughout high school or college, you should be aware that there is usually a two to three week period before you get your first paycheck, depending on where your employment start date falls in your employer’s pay-period cycle.
A cash cushion will be essential for tying you over until you can get your first paycheck. Putting a portion of your cash graduation gifts will position ahead of that curve.
As you implement these ideas, consider using Ellevest’s options to save and invest. I’m excited to be working with Ellevest to share information about saving and investing towards your short and longer-term goals. I will receive compensation if you become an Ellevest client.
I am definitely not suggesting that you forego any post-graduation fun spending with your cash graduation gifts, but I certainly don’t want you to miss the opportunity, like I did, to use some portion of this extra cash to shore up your finances.