Does Spring include Graduation? Be Prepared!

Each spring thousands of college graduates leave the safe haven of university life for the real world. From paying off student loans to the shock of auto insurance rates, there’s a host of new financial experiences awaiting these grads, and some situations for which they’re totally unprepared.

A 2012 study published in the International Journal of Business and Social Science found that 70% of undergraduates own credit cards. The report also states that very few students use their card for tuition but that most of the students would use credit cards for school supplies, textbooks, and food. Almost half the respondents say they only use their credit cards during emergencies.

The cost of credit
Perhaps the most unsettling surprise for recent college graduates surrounds the long-term impact that poor credit decisions can have during and after college.

To help avoid getting into credit trouble, college students and recent college grads should get copies of their credit reports to have a clear picture of their financial situations. Credit reports also can show the deep impact debt can have on credit histories, and allows you to spot any inaccurate information. Individuals can obtain a free copy of their credit report from each of the three major credit reporting bureaus–Equifax, Experian, and TransUnion–once a year.

In addition to obtaining a credit report, young grads also will want to regularly check their credit score. A credit score is a number from 300 to 850 and is used by potential lenders to determine the interest rate on loans and whether credit is granted, and at what cost. A credit score also can be obtained from each of the three credit reporting bureaus–but at a cost of around $15.

It’s never too early to start saving for retirement
One of the most serious mistakes young grads can make is to put off saving for retirement. Those in their late teens and early 20s may think that planning for retirement makes little sense, considering that it’s an event that won’t take place for another 40 years. But retirement is a process as well as an event. What occurs in the many years that lead up to retirement has a profound effect on the quality of retirement once it arrives.

Save for a rainy day
Many financial experts recommend you have three to six months of your salary and income put away in case of an emergency or unexpected expense. It’s important that this money be liquid, which means that you can withdraw it without penalty at a moment’s notice. You also will want to earn as much interest on it without incurring risk, which may make a money market account your best option. While you’ll never lose the money deposited into this account, you’re not guaranteed to increase the value either.

Call Hopewell Federal Credit Union today. We’re ready to provide the services and support you need–as you get started and as you move through life

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Tips for Parents of College-Bound Students

High-school students bound for college will embark on many new experiences–including financial independence. Here are some tips for parents to help kids prepare for what’s in store.

* Explain how credit works. A credit card is not free money; it’s instead a means of putting off paying for purchases until a later date. Accompany your child to the credit union for the best rates on credit cards and consider urging him or her to use a debit card instead.

* Create a spending plan. Write down all college expenses such as tuition, books, room and board, toiletries, entertainment, and so forth. Determine which expenses you’ll be paying and those for which your child will be paying.

* Come to a no-bail-out agreement. If your child ends up charging more than he or she can afford, or runs out of money before the end of the month, your first reaction may be to send money and bail him or her out. Don’t do it. If your child needs to figure out a way to get out of debt, such as working or staying home on weekends, chances are good he or she won’t make the same mistake twice.

Want a few more ideas?

10 Smart Money Moves for Your 20s

 

If you’re in your 20s, you have a financial asset money can’t buy–time. And time makes your money grow. “Making some smart money moves in your 20s pays off now and in the future,” says Bobbie Shocket Lazarz, CFP (certified financial planner). Here’s her list of 10 smart money moves for twenty-somethings:

1. Set financial goals, say, to take a vacation, go back to school, get married, buy a house, or start saving for an early retirement. Put your goals in writing, then calculate how much you’ll need to save each month to reach them.

2. Make a spending plan, limit your debt, and concentrate on paying off existing bills. Limit debt to your ability to repay. Monthly credit payments, excluding a mortgage, shouldn’t exceed 20% of your monthly take-home (after-tax) pay.

3. Build an emergency fund equal to three to six months’ living expenses, even if it takes years to build. Use this fund only for true emergencies, such as unexpected car repairs, illness, or unemployment.

4. Save at least 10% of gross income for your emergency fund, future goals, and retirement. If you can’t manage 10%, start with 5% and increase it over time.

5. Take advantage of the services Hopewell Federal Credit Union offers. You’ll earn more when you save and pay less when you borrow.

6. Make it a priority to get adequate health, disability, auto, personal liability, and tenants’ or homeowners’ insurance. If someone else depends on your income, you also need life insurance.

7. Once you’ve implemented your spending plan, built your emergency fund, and obtained appropriate insurance, make the most of your money by starting to invest. Lazarz says the key to making the most of your money is investing small amounts gradually and sensibly over time.

8. Use tax-advantaged savings plans your employer or the government offers to save money for your retirement, such as company 401(k) retirement savings plans and individual retirement accounts at Hopewell Federal Credit Union.

9. Keep job options open by keeping your job skills fresh. Get necessary training and education so your knowledge and skills stay up to date.

10. Maintain orderly financial files to keep track of your money and put your hands on important records when you need them.

Copyright 2007 Credit Union National Association, Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.