7 Ways Graduation Gifts Reduce Financial Debt
Cash graduation gifts are a great way to celebrate commencement and a new stage of life – and here are seven ways grad gifts can reduce your financial debt from the experts at Bills.com!
“Putting graduation gifts to good use helps start your independent financial life on the right foot,” says Ethan Ewing, president of Bills.com. “Making that investment is the perfect way to honor yourself and your achievement.”
The average graduation gift costs about $50, and cash or gift cards are the most commonly given gifts. A graduate who receives 10 gifts will start the summer $500 wealthier!
For info about after-graduation reality, click on How to Survive the Real World: Life After College Graduation by Hundreds of Head and Andrea Syrtash. And, read on for seven ways graduation gifts can reduce your financial debt from Ewing himself…
7 Ways Graduation Gifts Can Reduce Your Financial Debt
1. Save cash gifts. Don’t blow gift money on a night out or a new outfit. “If the gift is burning a hole in your pocket, allow yourself to spend about 10 percent frivolously,” Ewing says. “Put the rest in the bank or allow a trusted adult to hold it for you until the urge to spend fades.”
2. Barter. For most new graduates, cash is most helpful. Look into trading unneeded gift cards for cash. “If your parents are about to refurnish their bedroom, for instance, they might be willing to buy a home store card from you,” says Ewing.
3. Pay off debt. The average college student has credit card debt of more than $3,000. Paying $500 toward that debt would eliminate one-sixth of the balance. More importantly, a lump payment would turn the $500 gift into savings of more than $2,000 over the next few years. And if you continued paying $90 per month — the same payment you would have made originally — the debt would be repaid in 60 months (five years), saving more than $2,000. Your graduation gift can reduce financial debt by helping you save more money!
4. Start an emergency fund. Deposit cash into an interest-earning account where you cannot instantly withdraw it, but it’s accessible in case of emergency. Most new grads will find that $500 will go a long way toward covering a medical issue, a sudden car repair, a job-interview suit or even a plane ticket in case of a family emergency. Ewing says, “When you start working, aim to save 10 percent of your income to build the emergency fund to cover at least six months of living expenses.” To learn more, read 9 Tips for Building an Emergency Fund.
5. Open an IRA. Anyone can open an Individual Retirement Account (IRA). An 18-year-old who deposits $500 into an IRA that grows at a 6.5 percent annual rate until he or she is 67 years old will have almost $12,000. “If and when you are able, also participate in your employer’s 401(k) fund to be on the road to healthy retirement savings,” Ewing advises. Your graduation gift can reduce financial debt by becoming the base of a retirement fund.
6. Invest in good clothes. Graduates who will be going on job interviews or need to look professional at internships might find that a quality business suit can be a great investment. Go with classic styles and subdued, dark colors so that a suit purchase will endure for several years. “Seek advice from someone you respect, and do not be ashamed to bargain-hunt — you can invest money that is left over,” Ewing says.
7. Invest in travel costs. For graduates who will travel post-graduation, a passport is a good and often-necessary investment. Those driving cross-country might get value from a membership in an auto/trip service such as AAA. Graduates who will be renting a first apartment can apply financial gifts to a security deposit. Around town, gifts could help pay for annual car insurance, a commuting bike or an annual transit pass.
For more tips on saving money, investing, and reducing debt, visit Living on a Dime. They offer e-books on everything from shopping on a budget to decreasing moving costs.
Bills.com is a free website for people to learn about personal finance issues, credit cards, debt relief assistance, insurance, mortgages, and other loans.
What are your tips for – or questions about how graduation gifts can reduce financial debt? Please comment below!
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