A summer job can help to enhance your college application, add work experience to your resume, and pad your pockets with hard-earned cash for the school year. Though you may be tempted to spend the money right away, keep an eye on the future and consider these four smart ways to use your summer paycheck.
If you don't have a savings account, summer paychecks could be a good source of money to fund one. Why a savings account? In a word, access.
Unlike a checking account, you won't receive a debit card, and you're likely to be limited on the number of withdrawals or transfers you can make in a given month. You can still withdraw, of course, but these restrictions can serve as a healthy barrier between you and your money.
Consider setting up automatic transfers from your checking account to your savings account, so that a portion of your paycheck is automatically stashed away. Alternatively, if your employer offers direct deposit, you may be able to deposit all or some of each paycheck directly into savings.
High school students and college undergrads might consider starting a college fund with summer earnings. You can build your college fund in a new savings account, or mix the money with existing savings and keep track of the two balances on a spreadsheet.
Treat your fund as a pool to draw from to help pay for college expenses like tuition, school supplies, or cover the cost of living expenses; or redeem it one day for an experience that might otherwise be too expensive, like a semester abroad.
Even if your student loan payments are deferred until after college graduation, you could save money by making payments to your loans ahead of schedule.
Depending on your financial aid package, loans may accrue interest from the day you receive the money, or after your deferral period. In either case, paying down the principal now means you'll potentially pay less in interest over the life of the loan.
Retirement may seem far away at this point, but the earlier you start investing, the more time you have to let your money grow with the benefit of compound interest. You may be able to enroll in your employer's 401(k) plan, or you could open an individual retirement account (IRA). These options may also offer tax advantages if you don't withdraw money until your mid-to-late fifties.
Paying down debt and saving for the future may not be as fun as buying summer concert tickets, but they are wise ways to get ahead. Take a small portion of your summer paycheck and spend it however you want, and then put the rest toward one, or several, of these smart uses for your money.
Looking for more information about paying for college? Explore your student loan options and estimate the costs of borrowing with our student loan calculator, or call 1-888-411-0266 to speak with a Student Lending Specialist today.
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