Get Right Start with Money

Congratulations! You’ve graduated from high school or college and are headed into the work world. That means your first paycheck could be less than a month away.

A Bank of America survey says 62% of your generation has gained some financial education starting in middle school. Here’s four ways the experts at Bank of America say you can build on that and get your future off to a great start.

1. Know your existing resources. Did your parents have a 529 college savings plan for you? Is there any money left over? Resist the temptation to pull it out and spend it. A change in the law this year lets you roll that money into a Roth IRA and not have to pay a federal tax penalty.
2. Use your digital skills to help you set some financial goals. If you are a new college graduate, you probably have student loans to repay. Know how much that is and make it the top item on your brand new budget. Be sure to list your expenses one by one. Your phone bill and any subscriptions you have can add up fast. If you flag recurring charges, you are more likely to realize you can save money by canceling the ones you don’t use.
3. Wow! That first paycheck! It’s tempting to go shopping but don’t. You don’t “need” everything you “want.” Remember to factor in rent and all your expenses. And do put something in savings from every check you get. Ten percent of your net pay is a good goal. Make an emergency account the first step. Keep enough to cover three months of expenses in case of disaster – like losing your job – before you look at a big expense like a car. Consider keeping your emergency fund separate and open a second account to save for future purchases.

Retirement. It seems a long time off, but the earlier you start the more your investments have time to grow. If your employer offers a 401 (k), contribute enough to get the full match offered. Consider a health insurance plan that allows a health savings account. Most young people don’t have a lot of health expenses. You don’t have to pay taxes on your HSA contributions, any interest you earn on it or when you withdraw from it. You can take it with you from job to job or use it to cover your health care costs down the road. You can even roll it into your retirement account!