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Home > Planning
For... > Life Events > Graduation
If you are approaching or have completed graduation from college, you
are ready to enter into a whole new stage of your financial life. Now
you need to look at more issues in greater depth and with a completely
different perspective than ever before.
In other words, it's time to get serious about the decisions you make with your money. It all starts
with finding a job, but that's just the beginning. Here are a few other key
areas you will need to consider:
Life insurance
If you are like most graduates (or graduates-to-be), this is probably one of the last concerns you have. However, it makes sense to be prepared for unexpected events in life.
If you are married or have children, life insurance is critical at this stage
of your life. After all, it provides protection for your family's financial
future. Even if you are still single, life insurance can play an important role
in your overall financial plan, protecting other loved ones who could be
negatively affected by your untimely death. Different options available
include:
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Term life insurance, providing coverage for a set period of time, usually at a
very reasonable rate. It is strictly a death benefit policy.
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A variable universal life policy is another option that provides death benefit
coverage and the ability to build cash value in the policy through an
investment account.
Wealth accumulation
As you enter your working life, major financial purchases will become more
important to you — a home, automobiles, vacations, as well as the ability
to cover costs of emergencies that may arise. What's more, you will have
longer-term goals that need to be addressed, such as a child's education or
starting a business. You need to begin accumulating assets for those purposes.
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For short-term needs, you'll want to keep your money in investments that offer
little risk of a loss, but provide a competitive current rate of return. This
money should be liquid and easily accessible, such as in money market accounts
or CDs.
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For longer-term needs, you can try stock and bond investments, which have
better return potential but can fluctuate in value. Along with direct
investments in these securities, you can also access the markets through mutual
funds and variable annuities.
Saving for retirement
Even though you are just beginning your work life, it is vital that you begin putting money away for your retirement today. It starts with saving in your workplace retirement plan (if your company offers matching contributions make sure you put enough into the plan to take full advantage of it). Another beneficial approach is to save $2,000 per year in an IRA, beginning immediately. If you put that money in a Roth IRA, earnings grow tax deferred, and you can withdraw the money tax-free at retirement if holding period requirements are met. The sooner you begin to save, the greater your benefit will be.
| The
earlier you start, the faster you build wealth |
Investment
of $2,000 per year, earning 9% annual return,
through age 65 |
| Begin at age: |
Accumulates
to: |
| 21 |
$1,146,372 |
| 31 |
$470,249 |
| 41 |
$184,648 |
| This
hypothetical example assumes all earnings are reinvested and no taxes or fees
are assessed during the accumulation period. |
Content is for informational purposes only and may not accurately reflect your specific situation. Information is not intended to provide financial, legal, tax, or accounting advice. You should consult a qualified advisor for advice specific to your own circumstances.
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