A Few Lessons on Saving for College Grads

After graduating from college, most graduates living in reality already know that their first job out of college will not be high paying. Although you probably will be making more than what you made as a sales associate in the mall, you will also be bombarded with some major financial responsibilities and possible college debt.

If you are in this boat, as most are, it is still best to save your money. Many people get the misconception that their first priority should be to pay off any existing debt. While this is a noble goal, it is also smart to save. You can sock away a little money in a savings account and still make payments on credit cards or student loans. It may take a little longer to pay off your debt if you also save money, but in the long run it is a good thing.

This is because of compounding interest. The earlier you start saving, the more you will have in retirement. Everyone keeps hearing about how many people nearing retirement in the next 10 years are scrambling to compensate for the lack of saving maybe 20 years ago. This means workers in their 50s are having to sock away more for retirement than what they would have to save had they started saving on a consistent basis in their 20s.

Many people just out of college may think they are too in debt to be able to save, but the truth is, you can't afford not to save - especially if you get a job with an employer who offers a 401(k) plan. Pass up this and you pass up the opportunity to basically get free money for your future.

If you are dealing with student loans and credit cards, pay off the credit cards first. Your cards usually have higher interest rates than loans. If all you have is credit card debt, you want to pay off the card with the highest interest. Some experts also suggest paying off the card with the smallest balance so that psychologically you feel like you are making some progress in paying down your debt. Obviously, you will have to make the decision about what works best for you.

In addition, it is also good to budget your money. Once you get out of college, your new salary may seem like a lot more than what you had been making at the hamburger stand or library as a college undergrad, but you will also have more bills. You will have to deal with living expenses, healthcare, car costs and other discretionary expenses (such as entertainment). Being able to budget what you need from what you would consider an extra, is a good lesson to learn early on.

Too many people just out of college end up spending their money on nice clothes and cars and don't realize the danger in that until they are in their late 20s and having to move back home with their parents because their debt is so high over their heads they can't see straight.

Saving your money as you are paying down debt and learning to set up a financially secure future is a safety net. After all, if all of your money is going towards credit card payments or loans, you will not have emergency money should something happen in the future.