It is graduation season and graduating seniors of all ages need financial planning advice. The suggestions offered in U.S. News & World Report‘s “6 Financial Planning Lessons All High School Graduates Should Know” offer good food for thought no matter your age.
“Our brains help us spend more on credit that with cash.” Credit card companies know this—that is why they sometimes set up a table on a college campus offering t-shirts or water bottles to students who sign up for a credit card. Later in life, we may scoff at students for being enticed by trinkets but many of us take on debt with little thought of how we will pay it off. The article adds that credit cards are useful when used carefully (pay off the balance before the next billing cycle and sign up for rewards) but dangerous if you overspend.
“Financially, you are the only person you can trust in an emergency.” You may have family and friends to help out, “but having an emergency fund is the best way to know that you’ll be OK if disaster strikes.” Whether you work or you get money from family, save some of it. You won’t have to take on debt and you won’t strain any relationships by asking for money.
“Compound interest will make you rich – if you let it.” Those graduating this year have time on their sides when it comes to investments. Start to save even if it is only a little. Putting a little into an investment account now and it will grow as you age.
“Money can help make you happy – if you buy the right things.” U.S. News & World Report spoke with Michael Norton, co-author of Happy Money, whose research has shown that we are happier when we use money for experiences instead of things. Also: It helps if you don’t think of money as bad (because of the possibility of misspending it) but rather think of it as a way to get the things that are really important to us.