I was 15 when I received my first paycheck … and I blew it on a pair of Converse high tops. Sure, I looked cool for a while before holes started to form in the soles. But while the shoes came and went, so did other opportunities to put my money to better use.
Now that the summer season is winding down and Labor Day weekend has come and gone, you could be finding yourself sitting on a payday or two. That’s awesome! But what should you do with it?
Please note: We’re not financial experts (and don’t claim to be). Please consult a financial advisor or expert if you do have any questions.
That being said, we do know a thing or two about putting our paychecks to good use. Here are a few examples.
1. Start a rainy day fund
Not super-exciting, is it? Don’t worry — none of these answers will be! But you’ll thank yourself down the road for stowing some emergency cash when you really need it. When, you ask? I’ll happily answer that question.
Ever got yourself into a sticky situation and thought, “Oh, crud. How am I going to pay for this?” Maybe it’s happened during or after one of these scenarios:
- Car accidents
- Oil changes
- Parking tickets
- Family emergencies
- Date nights
- Trips with friends
Instead of reaching for a loan or a credit card and losing money on interest (more on that later), stash some cash away in a rainy-day fund so you’ll be more prepared for any surprises down the road.
2. Open a savings account
The easiest way to start earning interest and growing your money is to set it aside in a bank account. Savings accounts are great places to keep your money separate from your spending cash. Just putting away $25 a week can net you over $500 during the summer season! You may not make much in interest these days, but your neighborhood or even online bank is a great place to keep your money tucked away safely.
3. Save for retirement
OK, we know this idea is a total snoozer. But it’s really important to start saving for retirement as early as you can. In fact, here’s a question you won’t see on the SAT, but you probably should.
Would you rather:
- Immediately earn $100,000?
- Earn $1 that doubles every year?
No one would fault you if you took that 100 grand. But, if you’re a big-brain who checked the math, you would also know that option 2 banks you $1 million in only two decades.
In its most basic form, this is called compound interest. To earn interest, you have to do three things:
- Put your money away
- Don’t touch it!
- Let it grow
So unless you want to work forever and ever and ever, creating interest is a sensible way to save for your future. Starting a retirement fund that yields interest, or having your parent or guardian help you if you’re under 18, could help make your life easier down the road.
Did you know that once you start earning a paycheck, you’re eligible to open a Roth IRA account where your money grows tax-free? Check it out and your future self will thank you!
4. Save for college or pay off student debt
You can’t put a price on an education, but colleges still do it, anyway. And student loan debt is at an all-time high — nearly $1.6 trillion in 2020. Many students take out loans to pay for college, but end up spending decades just to pay it back because of interest.
Remember: High tops last a year or two, but an education lasts a lifetime!