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Five Financial Tips for Graduates

They say inside every old person you’ll find a young person asking the question, “What happened?”

There’s probably no better question when it comes to financial literacy and college graduates, especially in an age when many young men and women graduate from college saddled with enormous college loans. If that sounds like your child, you may find these quick tips helpful.

Invest that check from your grandmother. And all the other ones. The checks you receive from family could turn out to be the most money you’ve ever held in your hands. Resist the temptation to buy you and 15 friends a deluxe package to Burning Man. Instead, consider putting most of it in an interest-bearing account for use as an emergency fund (the Wall Street Journal’s AnnaMaria Andriotis looks at some here), the deposit on your first apartment or a practical big-ticket item such as a car.

Plan for that rainy day. Activate an automatic savings plan — $50 to $75 per month is plenty for now – so you’ll begin building up some cash to stash away for those unexpected expenses that are coming (and they’re coming). The rule of thumb is to aim for the equivalent of three months’ rent in a rainy day fund. (MarketWatch’s Andrea Coombes discusses some emergency fund options here.)

Be housing smart. If student loans represent the lion’s share of your debt, and you’ve lined up a job or have pretty good leads, you may want to find your own apartment, perhaps with a roommate. If not, don’t hesitate to consider moving back in with your parents for six months or a year, just until you get your sea legs.

Reboot your cell phone or cable TV plan. Tell providers you’ve just graduated and want to negotiate a better deal. You’ll be surprised how responsive they can be. Another smart move is to find out if you can stay on your parents’ healthcare plan until you’re 26, because it’s a provision of the federal health care reform law. (Check out NPR’s health care reform guide for young people here.)

Think about retiring. That’s no joke, actually. The fact is your future will be made up of a long succession of todays. So start participating in your company’s 401(k) program as soon possible. Especially since your pre-tax contributions will increase materially over time.

You learned in science class that money doesn’t make the world rotate, but it does make the world go ‘round. Now is your chance to start putting that know-how to work.