3 Must-Know Money Tips for New College Grads

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If you’ve just graduated from college, here are three key financial facts to help you get prepared to become an official adult. 

For many people, graduating from college is the start of adulthood. Hopefully, you’ll have a great job with your degree and will be going out on your own for the first time — or will be on the path to do so soon.

As you embark on this next adventure, there are a few money tips you need to be aware of. Here’s what they are.

1. Everyday items cost more than you think

If you’ve never lived in an apartment on your own before because you’ve been in a dorm or in your parent’s house, it may come as a shock to you to find out how much everyday items cost.

For example, the U.S. Energy Administration reports that the average monthly energy bill across the U.S. is $121.01. Depending where you live, you may also have to pay for things like sewer, water, and garbage services. This can add up to far more than you might expect if you’ve never paid for these things before.

It’s important to make sure you take these items into account when deciding how much you can afford to spend on an apartment or house after graduation. You don’t want to drain your bank account because you forgot to consider your total costs for living on your own.

2. Surprise expenses happen

When you’re young and just starting out, it’s tempting to assume everything will go smoothly and you won’t face any major surprises — but that’s simply not a reality.

Unexpected expenses can happen to anyone at any time. In fact, the Federal Reserve reported about 20% of adults faced major unexpected expenses over the prior 12 months. You might end up on the hook for extra costs if, say, your car breaks down or you have to travel at a moment’s notice due to a family problem.

You need to be prepared for these surprise costs, so start saving up an emergency fund in a high-yield savings account ASAP after graduation.

3. The right kind of insurance coverage is crucial

Buying insurance can be very complicated, but it’s something you need to think about as a college grad.

You may soon have to leave your parent’s health insurance if you are still on it, or you may be given the chance to sign up for coverage at work. Pay attention to the premiums (amount you pay each month) as well as the copay (amount you pay out of pocket for services) and deductible (amount you pay before the insurer starts covering bills). You’ll want to try to find a good balance with an affordable plan that has low premiums but that doesn’t require you to pay a fortune if you actually need care.

You should also be sure you have enough car insurance to protect your assets in case the worst happens (including liability coverage, collision coverage, and comprehensive coverage to pay for damage you cause others as well as theft and damage to your own vehicle). And, you may wish to consider buying life insurance as it can be cheaper to buy it at a younger age. You’ll be happy to have it in place later if you have dependents who rely on your income.

By taking care of your insurance needs, making a realistic budget for everyday expenses, and preparing for emergencies, you can ensure you’re taking the right steps as a new college grad so you can build a foundation for financial success.

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