Money Management for College Grads

College graduates have more on their plate than just landing that first job — many students have loans to pay back, and according to Day to Day personal finance contributor Michelle Singletary, it's never too soon to start planning for retirement. She discusses money management for college grads with Alex Chadwick.

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MADELEINE BRAND, host:

Financial advice now for college graduates searching for full-time jobs. Well, universities may prepare students to find work in their field, but money management courses are not prerequisites. DAY TO DAY's personal finance contributor Michelle Singletary is here to fix that. She spoke about this with our very own Alex Chadwick.

ALEX CHADWICK, host:

Michelle, what is the biggest mistake that college graduates make when they start to work?

MICHELLE SINGLETARY reporting:

Actually, they make a couple mistakes, but the biggest is not signing up for their retirement plan right away, day one, before they take their lunch break. I mean, it is so important that they understand that they've got time on their hand because they're so young. I wish I was that young again, you know. And they need to do that right away because the more you save at the beginning, the less you have to save as you get older.

Secondly, they spend too much money. They want to get the nice apartment, the new car, the clothes for the new job, and you really don't need all of that, just a couple basic pairs of pants and jackets and suits or whatever, if your male or female, you know, room with someone, get a used car. You may even want to stay home with your parents for a little while while you get your financial bearings.

CHADWICK: You know, I'm hearing young people say, `Oh, yuck, what a drag. Come on.' There are some other things here, OK. When you get out of college these days, you've got a lot of money to pay off, right? Many people have student loans--large student loans. Should you start paying off your student loans or should you start putting more money into that retirement account or some other kind of savings account?

SINGLETARY: All of the above, and I know that there are people out there and parents thinking, `This woman about lost her mind. What is she talking about?' But listen...

CHADWICK: My kids aren't going to do any of that. Never mind all those things.

SINGLETARY: I know. But the average student is paying back at least $28,000. Many much more than that. But the important thing is that if you don't start to save right away, you will never build up that rainy day fund, and you know what? You always need that rainy day fund because it's always going to rain, and so you need to do both; pay down those student loans, pay them on time all the time, and then try as best you can to save some money as well. I don't care if it's $5, $10 and, in fact, pay that before you pay your student loan. Pay your student loan, but save first, because if you save last, there won't be any money left.

CHADWICK: You aren't going to save at all. Is there a trick to saving for young people, a good way to go about doing it?

SINGLETARY: Absolutely. Listen, when I got my first job, my grandmother, Big Mama, told me, `Take your little self'--actually, she said `behind'--`up to the benefits office, sign up to automatically have a certain amount of money taken out of your paycheck and put in a savings account.' You will always have a piece of money, like my grandmother said.

CHADWICK: One of the things you do when you sign up is you find out about these benefit packages that many companies offer. It can be quite confusing to go through. Are there particular things people should pay attention to?

SINGLETARY: Absolutely. Make sure you've got good health coverage. You know, look through that package. Pick the right plan for yourself, particularly if you're single. You don't need a family plan obviously. And listen, one thing that lots of young people make the mistake of is they get life insurance rather than disability insurance. And I'll tell you why. If there's no one relying on your income, you're just by yourself, you don't have any kids, you're not taking care of your parents, you don't need life insurance, because if you die, there's no one who's going to suffer financially. You'll more likely become disabled than to die, quite frankly.

CHADWICK: DAY TO DAY personal finance contributor Michelle Singletary. She writes the syndicated column The Color of Money for The Washington Post. I think the name of your book should be "Everything I Know, I Learned From Big Mama," but it's not. Michelle, thank you.

SINGLETARY: I tell you, she was a wise, wise woman.

VIGELAND: And that interview by my colleague, Alex Chadwick, who returns to the program tomorrow. You can send your questions for Michelle to daytoday@npr.org and put `Michelle' in the subject line.

DAY TO DAY is a production of NPR News and Slate.com. I'm Madeleine Brand.

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