Where To Put Your Money After Graduating College

With graduation season right around the corner, the class of 2021 is gearing up for what their lives will look like post-college.

As they prepare to enter the workforce, this period is a significant time marking the start of their careers. For new grads, it’s also an opportune moment to make sure they start off on the right financial foot. The money moves you make in your younger years can have a huge impact on what your personal finances look like for years to come.

For grads-to-be, here are two things you should do with your money to help you build a strong financial foundation.

The purpose of a starter credit card? To help you build credit.

Your credit history — or the length of time you’ve had credit — makes up 15% of your credit score. So, the earlier you begin building credit, the better.

A good credit score will help you qualify for an apartment, as well as get the lowest interest rates on a new car loan or a future mortgage.

Recent grads who have a very short credit history (or none at all) should consider opening a starter credit card, also known as a secured credit card. Similar to using a traditional — or unsecured — credit card, a secured card allows you to charge purchases against your credit limit and then you pay your balance off in full each month when your bill arrives.

The big difference between secured and unsecured cards, however, is that the former typically requires cardholders to make a security deposit upfront (usually $200) that is equivalent to their credit limit. This deposit acts as a form of collateral in case the cardholder doesn’t pay their bill each month, which is why they’re great for beginners as they learn how to use credit responsibly.

Below are Select’s three top-rated credit card picks for recent college grads:

1. Best card for no credit: Petal® 2 “Cash Back, No Fees” Visa® Credit Card
2. Best card for bad credit: Capital One® Secured
3. Best card for fair and average credit: Capital One® QuicksilverOne® Cash Rewards Credit Card

For recent college grads who score a job that offers a 401(k) plan with matching contributions, make sure you prioritize putting your money toward it, says Brian Walsh Jr., Pennsylvania-based senior wealth advisor at Walsh & Nicholson Financial Group. Otherwise, that’s free money you’re leaving on the table. If you can’t afford to meet the match, work your way toward it each year by upping your contribution by 1%.

Most companies offer two types of 401(k) options: pre-tax and post-tax. “For someone just graduating college, chances are you’re in a very low tax bracket and should take advantage of a post-tax or Roth 401(k),” Walsh says. “This will allow you to pay tax on contributions today at lower rates, rather than at higher rates in the future.” Contributing as much as you can to a Roth 401(k) now means paying less in taxes in retirement.

For those recent grads whose first job doesn’t offer a 401(k) plan or a post-tax option in your 401(k), Walsh recommends opening your own Roth IRA account to ensure you are putting away a portion of your paycheck for retirement and getting the same tax benefits.