By Olivia Hull
At least for me, the prospect of graduating in two years’ time is exciting but also daunting. “What will I do with my life?” isn’t an uncommon question for prospective college graduates all over the world as well as “how will I become financially independent?”
Money is something that involves a certain level of skill in its handling as well as organization and basic know-how. Even if you don’t think it can buy you love or happiness, you’ve probably thought abut the ways in which it will effect your life in the future: where you’ll live, who you will live with, how you will make the money you use to pay rent and buy food. I too had given these things some thought, and even the little thought I gave them caused me considerable anxiety. Not only was I totally ignorant of the meaning of certain terms like “stocks” and “mutual funds,” I also couldn’t conceptualize the ways in which I would have to manage my money on a daily basis.
I’m not sure why these kinds of things aren’t taught in college. Maybe it is assumed they are taught at home, or in high school, or are self-taught through experience. I don’t think my parents understand these things much better than I do. The wealth of information on the internet and in literature regarding money management is certainly expansive, but I find it overwhelming. This was all before I attended the all-day Athena Leadership Lab course “Life after Graduation” in which we learned how to manage, save and grow money. My eyes were opened and my life was changed. Now I will pass onto you what I have learned.
First of all, if you don’t have one already, get a credit card. Not one of those imposter Visa Debit/credit cards, which are not in fact credit at all (they don’t send you bills that you have to pay within a certain time period, they just offer the convenience of the VISA logo and take money directly out of your checking account). You need to have a credit card because having good credit in life will enable you to buy a car, take out a loan for graduate school and pay a down-payment on your first house (Seems far away but it isn’t really). Having no credit (i.e. no credit card) is bad credit. The bank is looking at your credit to see if you pay your credit card bills on time, if you will be a reliable at paying back their money so they want to see that you’ve proven yourself. (Reliable credit card comparison websites include cardweb.com and bankrate.com.) You might look for a card that doesn’t require an up-front fee, or one with a low interest rate if you’re bad at paying your credit card bills on time.
Second, don’t be satisfied with the low interest rate on your bank’s savings account. Look higher. ING Directs Orange Savings Account, for one, has an interest rate of 1%, which is 10 times the default interest rate at my bank.
Third, if you do have money saved up in a savings account, look into ways to turn it into more money. Some options are mutual funds, government bonds and stocks.
Fourth, in preparation of your first job, learn the basics of retirement plans, even if you don’t anticipate pursuing a single career with one company. The standard corporation retirement plan, called a 401(k) is basically when the company takes a certain percentage of your paycheck, matches that amount, and puts it into a mutual fund, tax-free, so it can grow into more money. The 403(b) is the non-profit employer version of the retirement plan. For self-employed workers there is the option of the IRA (individual retirement account) and the ROTH IRA for lower income-earners (under 120,000 a year).
You don’t have to figure it out all at once, just start thinking about it.
Olivia is a sophomore at Barnard College and a staff writer for The Nine Ways of Knowing.