Congratulations, Graduate! Here Are 4 Things to Do With All That Cash

by Jessica Sommerfield · 2 comments


Cash tops the list of popular graduation gifts year in and year out. If it’s your turn to don a cap and gown this year, congratulations – you probably pocketed a significant amount of change along with your achievement. Based on the National Retail Federation’s 2016 Graduation Spending Survey, most people expected to spend about $53 on their grad gifts. If even 20 well-wishers gifted that amount, you’d have over $1,000.

So, what are you going to do with it?

Since we tend to view graduation gifts as a form of “extra” money (a psychological money trap known as mental accounting), it can be tempting to quickly reach for that wish list. Before you do, though, consider these four ways you can use it to both celebrate your achievement and give yourself a better financial foundation for the future.

  1. Celebrate the present.

You’ve achieved something important, so go ahead — spend some of that money on yourself, any way you’d like. But, instead of blowing the whole sum, financial advisors recommend setting aside about 10% for yourself. If your cash gifts totaled the $1,000 we estimated, that still gives you $100 to spend on clothes, electronics, entertainment – whatever.

  1. Invest in your future.

With the other 90%, one good choice is to invest in tools that will help you succeed in your next life steps. If you are jumping into a high tech job, that might be a new laptop or specialized software you could use to make work life more efficient.

There are also other practical needs like expensive furniture and household goods if you are moving out. Although the return can be harder to quantify, putting some of your graduation gift money toward these expenses is truly an investment in yourself.

  1. Save for the future.

Graduation cash doesn’t have to burn a hole in your pocket – it’s okay if you don’t have a plan for it right away. In fact, saving it is a very good plan. If you’re already on a budget or would like to start, treat your graduation money like income and apply the 50/20/30 rule. Savings is the 20%, so calculate this much and set it aside.

Although you can certainly save for the future in terms of life after college, you may need to first focus on shorter-term needs like living expenses.

David’s Note: Many people are shocked when they first live on their own because buying another set of pretty much everything in a house requires a ton of money. Pots and pans, toiletry, vacuum and the like all adds up. Save up because you’ll need the funds.

One of the best places to save your cash is in an online savings account, which typically offers a higher interest rate than a traditional savings account at a local bank. And since you won’t see the sum in the high-yield accounts when you check the balance on your checking account in many cases, you’ll feel less flush and be less tempted to spend the funds on impulse purchases.

  1. Invest for your future.

Investing in your future is important, but so is investing for your future. For young investors, many financial advisors recommend mutual funds with low percentage management fees or — as MoneyNing recommends — low-cost index funds. The key is to choose an option that doesn’t require extensive management, knowledge, or risk, especially when you’re just getting started.

The amount you invest isn’t so important; after all, your money and your salary will grow for decades to come. They key is to start learning the ins and outs of investing while the stakes are low. Not only will this give you another, potentially more profitable, savings channel, you’ll learn solid investment management skills that will set you up for the future when you need to properly allocate the wealth you will accumulate for the rest of your life.

Regardless of how little or much your graduation cash amounts to, determine to enjoy a little, save a little, invest in yourself, and plan for the future. The way you choose to use this money can set a trend of how you’ll manage your money for years to come, so let it be a good one.

Editor's Note: I've begun tracking my assets through Personal Capital. I'm only using the free service so far and I no longer have to log into all the different accounts just to pull the numbers. And with a single screen showing all my assets, it's much easier to figure out when I need to rebalance or where I stand on the path to financial independence.

They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.

Money Saving Tip: An incredibly effective way to save more is to reduce your monthly Internet and TV costs. Click here for the current Verizon FiOS promotion codes and promos to see if you can save more money every month from now on.

{ read the comments below or add one }

  • Bernz JP says:

    Finding that right entry level job may be the toughest for a new graduate. It’s not as easy as we all think it is unless you’re a technology graduate. My son graduated with honors in Animation last year and still looking for a job. He’s now strongly considering a switch into the tech industry.

  • Samuel says:

    It is nice you hammered on the investing to invest for the future. Otherwise, some will just lavish the money by throwing a big party. Another important thing they need to do is to pay down their student loan is there is any.

Leave a Comment