Caitlin's Corner

Financial Wisdom for HS Seniors

There's something magical about watching students walk across the graduation stage: cap slightly askew, diploma in hand, parents cheering from the stands. Whether graduating high school seniors are off to college, a job, or a season of exploration- graduation signifies the beginning of something entirely new: real independence.

But here's what no one mentions during those inspirational graduation speeches: the world these teens are stepping into operates on a completely different currency than good grades and perfect attendance. Out here in the real world, it's your credit score that matters, and knowing how to track your finances that separates those who survive vs. those who thrive.

I gave a mini-speech on my high school graduation day. As the vice president of my class, I was offered the chance to share a few words with my fellow classmates, and then introduce our class president. I recently watched a video of my niece absolutely slaying her middle school graduation speech to her class. It made me proud- and also utterly ashamed as I remembered the speech I gave and how ill-prepared I was to give it. It's no small feat to come up with encouraging words for your peers as you venture out with them into a completely unknown world.

If I could give that speech today, I'd skip the generic advice and cheesy jokes. I'd double-down on the message to make joy-driven decisions rather than job, or status-driven decisions. But I'd regret it all over again if I didn't share very practical, financial wisdom they could take with them and apply immediately, and for years to come. Here's what I want every graduating senior to know:

Money Truths All 18-Year-Olds Should Know

Build credit early- by being smart, and VIGILANT. Avoid the predatory credit card company employees that swarm college campuses! They'll give you a free t-shirt in exchange for years of stress and shame, and millions in lost wealth. Credit card companies promise the freedom of spending with only the obligation to pay a minimum balance. Never fall for this trap! Instead: Consider getting a student credit card or becoming an authorized user on a parent's card. Use it for small purchases and pay the full balance every month. Good credit will help you qualify for better rates on loans, apartments, and even some jobs.

Open a checking and savings account if you haven't already. Look for accounts with no monthly fees, especially those designed for students. Many banks waive fees for young adults. Set up automatic transfers to move money into savings regularly, even if it's just $25 a month. Building history with a bank you like can help you get better lending in the future.

Learn to budget before you need to. Track your spending for a month to see where your money goes. There are plenty of apps that can help, or you can use a simple spreadsheet. Understanding your spending patterns now will serve you well in college and beyond. See our blog post about how to do this.

Be strategic about student loans. If you're heading to college, borrow only what you need. Federal loans typically offer better terms than private ones. Remember that every dollar you borrow will cost more when you pay it back with interest. If you're not fully committed to the major you've declared, or what you want to study, consider hitting pause on an education that you're funding through debt (or with the help of someone's hard-earned money!), at least until you feel like you have a better sense of your desired path. Student debt can be soul-crushing for many decades after you graduate- do not take this on lightly!

Nail down a solid savings rate. If you get a job, try to save at least 10% of what you earn. The earlier you start saving, the more time compound interest has to work in your favor. Even more: this tricks your brain not to get used to a certain amount of income. You'll learn to be resourceful in living off the money you keep after saving. Challenge yourself to keep increasing your savings rate whenever you can. The habits you build now will set the foundation for your financial well-being for decades to come.

Contribute to a Roth IRA. If you have earned income, start contributing to a Roth IRA. This is an account you can open on your own using most online brokerage services, or your bank may even offer this type of account. Choose an index fund to purchase with the funds in this account and watch it grow. Money invested here has more flexibility than traditional retirement funds, and gives you tax-free growth in retirement.

Avoid lifestyle inflation. As your income increases over time, resist the urge to immediately upgrade your spending. Instead, put raises and windfalls toward savings and debt repayment first.

Get financially literate. Take advantage of free resources to learn about personal finance- read books, talk to friends, ask lots of questions. Understanding how retirement accounts work, the behavior of different debt and investment instruments, and how to purchase your own investments can save you millions of dollars over your lifetime. While passion and purpose matter enormously, financial literacy is what gives you the freedom to pursue them without drowning in debt or stress.

Economics 101?

Nope. These aren't the lessons you'll learn there. They're the real-world strategies I wish someone had shared with me at 18- the ones that can set you up for success before you even set foot on a college campus or in your first apartment.

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