When you graduate, you might end your academic journey with more than a diploma in hand — you could wind up with a generous cash gift, too.
The average person giving graduation gifts last year planned to spend about $53 on each, with cash being the most popular present, according to the National Retail Federation’s 2016 Graduation Spending survey. If 10 people were to give you a monetary gift in that amount, you’d pocket about $530.
So what should you do with your graduation money? Put it toward that trip to Europe you’ve been dying to take or the student loan balance hanging over your head? Ultimately, it’s up to you.
“When you’re young, your decisions are important and should align with your goals, your circumstances and your values,” says Jason Kirsch, a certified financial planner in Santa Monica, California. “That will prevent people from regretting things going forward.”
Factor your savings, debt and job prospects into your decision. Here are some recommendations to get you started.
Building an emergency fund is an important first step toward financial health. You probably won’t own a house fresh out of college and therefore don’t have to worry about the cost of homeownership-related emergencies, but you still might face unexpected expenses like car repairs or medical bills.
Having a $500 cushion is a solid foundation. In the long term, aim to save enough to cover three to six months’ worth of expenses. Your graduation gift alone might not be enough to get you there, but any emergency reserve deposit helps.
For nonemergency costs, set up a general savings account, if you don’t already have one. Tuck away some of your gift to cover living expenses like gas or work clothes, even if you live at home with your…