Skip to content

4 tips on saving money for recent college graduates

Super Life  Transformation 2012 Graduation in New Orleans during the Essence Music Festival.

3) Should college grads open retirement accounts? What are the best 401k plans for college grads?

In general, yes, college grads should open retirement accounts as early as they can afford to give up a little bit of their income.  Here’s why: retirement is expensive and the sooner you start saving the more your money will grow.

CNN Money outlines a really great example to illustrate this.  If you start saving at 25 and save $3,000 a year for 10 years, you could have $472,000 by the time you’re 65.  By contrast, if you start saving at 35 and save $3,000 a year for 30 years, you would only have $367,000 when you reach 65.  That’s a really big difference!

Of course, $3,000 per year is probably high for a recent grad.  Start with whatever amount you can afford!  One popular approach is to carve out a small piece of each paycheck and have it automatically deposited into the account, so you don’t “miss” the money (and aren’t tempted to spend it impulsively).

That said, it’s very much about your personal situation.  If you are unable to pay your debt and basic living expenses, then it might not be feasible for you to save for retirement yet.  In that case, paying down high priced debt now (high interest loans, credit card bills) should be your first priority.

If you can start saving, ideally you’ll do so in a 401k plan offered by your employer.  Beyond that, we can’t say “which plan” you should choose because your options will be dictated by your employer.  One thing we can say: if your employer offers matching contributions (such as contributing $0.50 for every dollar you contribute): take advantage!  This is essentially free money.

If a 401k plan isn’t offered by your employer, you should look at IRAs (Individual Retirement Accounts).  Again, there are many options.  Talk to a professional who can offer you some guidance (your local bank or Charles Schwab are good places to start).

Pages: 1 2 3 4 5

1 Comment

  1. Brielle Franklin on June 6, 2013 at 11:05 am

    Thanks so much for this great information. I have been looking for someone to buy my annuity so I can start to pay off my college loan debt. This was such an informative article. I will be taking some tips and using them in the near future! Thanks so much for sharing.