By Roslyn Davis,
Special to the AFRO
As we celebrate Financial Literacy Month in April, it is crucial to empower young people and teach them how to take charge of their finances.
Entering the “real world” can be scary as a recent college graduate. Not only do you need to adjust to a 9-5 job, but you’ll also need to master life skills, such as cooking, cleaning, budgeting and money management. While some may have learned these basic life skills at a young age, for many, it’s the first time accomplishing these daunting tasks solo.
On top of that, student loan debt continues to widen the racial wealth gap, making it particularly difficult for Black college students to build savings, and achieve financial goals such as buying a house, investing or starting a business.
To help guide students post-graduation, we’ve gathered the following financial tips from Raya Reaves, finance coach and founder of City Girl Savings, an organization that teaches working women how to reach financial success.
#1: Don’t Wait to Pay off Your Student Loans
If your student loans are deferred for a certain amount of time, but you have the ability to start paying, then start paying! Even if you pay as little as $25 a month towards your loans, you are making it easier for your future self. Don’t let the high balance scare you into “thinking about it later,” the balance isn’t going anywhere. The sooner you start paying them down, the sooner you will be done with them.
#2: Start Building Good Credit History Early
I had to learn the hard way the value of good credit – zero to low-interest rates, ease of borrowing and the option to get what I needed- when I needed it. The earlier you can start building a good credit history, the more options you’ll give yourself in the future. Whether it’s buying a new car, getting your own apartment (without a cosigner), or purchasing your own home one day. Not sure where to start? Consider a Self Credit Builder Account! You get to decide on an amount and payment term that works best for your budget…and you already know how important a budget is! Then, as long as you make on-time payments every month, you start building up your credit history. Once you’ve paid off the Credit Builder Account, that money is all yours to save.
#3: Use a Budget and Track Your Spending
Most of us aren’t lucky enough to make major bucks fresh out of college. According to the National Association of Colleges and Employers, graduates in the class of 2020 earn an annual salary of $55,260. While this number has been steadily increasing each year, the cost of living in the United States has gone up as well. It’s crucial for college graduates to start using a budget and track their spending. Building those positive financial habits now will make sure you can handle salary increases in the future. Not to mention, a budget is one of the best tools for reaching financial success and happiness!
#4: Start Contributing to a 401k or IRA Immediately
Most companies don’t start matching your 401k contribution until you have been employed for at least one year. That doesn’t mean you can’t start contributing to your 401k right when you get hired. The sooner you start saving for retirement, the more you will have when it’s time to retire. In fact, a 25-year-old who contributes $300 per month until the age of 65 will have over $1 million dollars at the time of retirement (assuming the historical 8 percent growth rate). If you start contributing earlier, you will have more! If you don’t have the ability to contribute to a 401k, then an IRA is a great second option!
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