Summer is here! And with summer comes summer jobs for a lot of high school and college students. While a lot of students work during the school year, when summer comes, full-time work often comes along with it.
It’s pretty easy to feel flush with cash when those paychecks start rolling in, especially if you’re still living under your parents’ roof. But what should you do with that money?
No, don’t worry, I’m not here to tell you to save all of it. In fact, I think that’s a terrible solution. But I do have some reasonable suggestions.
Put a Percentage Into Savings
Save a set percentage of your paycheck. If you can, I recommend putting 50% of your paycheck into a savings account. If you don’t have a savings account, now is a great time to open one. Sure, interest rates aren’t super high, but even making a few dollars on your savings is better than nothing.
This is what I consider long term savings. You’re saving for when your life changes and you need to make some big purchases. Like maybe you are graduating college and want to buy some non-thrift store furniture for your apartment. Maybe you’re headed to college and want a new laptop to last you the next four years. Basically, you’re putting this money away for the future.
If you can’t swing 50%, consider at least 25%. Future you will be so glad that you have this money and don’t have to sleep on a terrible futon mattress.
Save for a Near-Term Purchase
Okay, sure, buying a computer in a few years sounds great, but what if you want a new computer now? Or a car or a phone ot any number of expensive things? Then save for that too. It’s never wrong to have multiple buckets of savings, even if all of that money goes into the same account. Just make sure you keep track of where your money is supposed to go. That’s easily done in Google Sheets or any number of spreadsheeting programs. Or you can just put it on a post-it note stuck to your computer monitor. Whatever works best for you.
Take a Look at the Year Ahead
Are there any big things you will want to spend money on over the next year? Big school trip, spring break, concert tickets? Even though you may work during the school year, it might be easier to start saving for those things now while you’re working 40 hours a week instead of 15.
Have a little fun!
While I certainly don’t avocate blowing all your money on fun, you definitely should be sure to spend some of your money on fun things. Go to the movies, go out with your friends, order in pizza and binge watch Netflix. Do what makes you happy. This is something I advocate for everyone, regardless of their financial state. Maybe they can only afford $5-$10 a month for fun, but even that will get you a few movie rentals. Everyone needs a bit of fun money.
But What About Investing?
In general, I don’t advocate investing for people working summer jobs primarily because I think of investments as a long term strategy, and I think young people often need easy access to their money. Liquidity is important here. If you’re really interested in the stock market, take some of that fun money and buy a few stocks, but I wouldn’t make that your savings plan right now. Yes, long term investing can bring about some serious yields, but life is about balance, and sometimes money just needs to be spent.
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.