AUBURN, Ala. (WRBL) — Financial Management Agent Russell Lowe with the Alabama Extension at Auburn University shared money management tips for new graduates.
Many graduates from high school, trade school, community college, or a university face major financial decisions for the first time. Some of those financial decisions involve getting student loans, using credit cards, and creating savings and retirement accounts.
Lowe said that developing strong money habits early can have long-term benefits.
“Making wise financial decisions after high school and during college will pay dividends,” Lowe said. “Avoid that desire to keep up with the Joneses. Set realistic and achievable financial goals for yourself, and the rest will work itself out in due time.”
To help establish a good financial foundation, Lowe shared tips for individuals navigating life right after graduation, throughout college, entering a career, and approaching the age of 30.
When receiving graduation gifts such as cards and cash, Lowe advised graduates to make the smart decision to set aside the majority of the monetary gifts.
“Start a savings account early,” Lowe suggested. “Having a rainy-day fund means you’re better prepared for life’s little surprises. Those always come when least expected. If it’s possible, save 70% to 80% of what you receive for graduation. Then, enjoy the rest, but also consider if you could use it for a purchase that will benefit you long-term.”
Lowe said that for people continuing their education, the next steps include selecting a field of study and considering its costs, especially potential student loan debt.
“Be sure your major can lead to a career that will sustain the way of life you want,” Lowe said. “For student loans, it’s a good rule of thumb to only borrow what you need to cover the cost of your education. That helps limit debt exposure after graduation.”
In Alabama, residents can apply for a credit card at 19, and Lowe said that while establishing credit early on is important, young adults should proceed with caution.
Once someone enters the job market, they can begin contributing to a 401 (K) benefits.
“Statistics show that opening a 401(k) plan in your early 20s will lead to substantial savings once you reach retirement age,” Lowe said. “That could make it possible to retire comfortably as a millionaire. Compounding interest is a beautiful thing. Also, make sure you maximize the employer match contribution to your retirement account.”
For long-term stability, Lowe recommends forming good financial habits during the late teens and early 20s. Focusing on limiting debt, building savings, and setting realistic goals can be beneficial.
