Just seeing the word savings, most of you will half-chuckle and blow right by this section because you have either exhausted your savings to attend college, or you don’t have the capacity to plan for the future at the moment. Either way, savings seem both impossible and unimportant at this stage of life. Let me tell you why you should save and give you some good ways to put aside a few bucks for the impending purchases and expenses that come with post-grad life.
First, the best time to start saving is yesterday. The earlier that you get the ball rolling, the higher your earnings capacity will be. This is because of a concept called compound interest.
We know that when we put money into savings or investments they earn varying degrees of interest. Interest is simply a percentage of the amount you invested (called the principal) that is paid back to you by the bank or company that the investment is in.
The cool thing about interest is that it often compounds, meaning that you earn interest on the principal (amount originally invested) AND on all interest earned up to that point. After a few easy calculations, you can see that the longer you have money put away, the more it will generate in income in the future! (Look into the Personal Finance course offered at Milligan for a further explanation.) If you start saving now, you are putting yourself in a better place during your retirement years.
This is hardly a compelling argument for someone in their college years, in which every dollar is stretched to the last penny, and a Cookout tray looks a lot better than a few extra bucks 50 years down the road. However, ignoring savings now will have more immediate consequences than you might think.
Think about what your situation might look like post-grad. Some of you will be beginning entry-level jobs in your field, others of you will be trying to pay your way through grad school. This stage of life will inevitably come with expenses beyond those you have now. You may need to dip into savings to pay for loans, pay rent, etc. Even if you make it without touching savings, you will likely not have the ability to save much in these first few years, further diminishing the gift of compounding interest.
So maybe you’re convinced now to start saving and investing to help yourself out in the future, but you realize you need to have/make money to save money. If you’re not already in one, and are eligible for one, look into a work-study position. The hours are usually flexible and some even allow you to catch up on other things while you’re working. Even a 5-hour work-study can add up over time. A part time job can also give you a little financial boost during the school year. It’s no secret that we’re all busy, but sacrificing a little free time or prioritizing a part time job will pay off greatly when the paycheck comes.
Maybe your schedule is completely packed without a work-study or job, but you can see where you can cut back in just one area of your spending. If we all take a closer look, there are likely some ways you can think of to save a few bucks. Once you have freed up a few bucks, you can take that to your bank right now, put it in a savings account, CD (another type of savings account), or even try out the stock trading market. (There are a number of online services for this, such as STASH, Acorns, and Robinhood. Please research each to see which would fit your situation best.)
I would never suggest stopping outings to do do fun things with your friends or eat out, but understand that with every choice comes a trade-off of financial benefit. If you can teach yourself to delay gratification, you will likely see those choices paying off in big ways down the line.