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  • Setting money aside for emergencies helps prepare you for the unexpected.
  • You don’t need a lot of money to start investing. The key to big gains? Starting early.
  • Try using some of your summer job money to get a head start on paying off your student loans. It could save you thousands of dollars in the long run.

For many college students, the warm weather months mean it’s time to start working that summer job. While you may have plans for that hard-earned cash, consider using some of your earnings to make the financial transition after graduation easier. Whether you choose to save your summer job money, invest it, or pay off your student loans early, your future self will thank you.

1. Prepare for the unexpected

Unfortunately, emergencies aren't a matter of if, but when. Emergencies also don't just apply to a hospital visit or accidents. The reality is any unexpected expense can throw a wrench in your finances—even a parking ticket or getting your car towed. That's why setting aside some money is a good idea. An emergency fund may also help you pay for school if financial aid, a scholarship, or a student loan doesn't come through in time or simply isn't enough.

2. Make your first investment

The beauty of investing is that your money can grow for you over time. This is true even if you start with small amounts and especially if you start young. This is what financial experts call the power of compound interest and it's actually quite simple. When your initial investments give you a return, that return is then reinvested and can earn you even more money. The more time you have, the more money you can earn.

As for where to start, look into opening an Individual Retirement Account (IRA)—such as a Roth IRA—and try making the maximum contribution each year that will qualify for tax benefits.

Exchange traded funds are indexes that track multiple factors of the market. For example, the S&P 500 is an index of 500 stocks made up of companies selected by economists. By investing in the index fund, you're putting a little bit of money in each of these companies.

A money market fund may also be a good option because it will likely yield a higher return than a regular savings account. This type of fund allows you to invest money in things like US Treasury bills. The downside is it likely won't yield as much of a return as exchange traded funds because they are very low risk. Regardless, it may be a good place to put some of your money until you get more comfortable with investing. A financial advisor or accountant can be a great resource to help explain your investing options and answer any questions.

3. Get a head start on paying off student loans

Making student loan payments—even small ones—while in school can help offset the interest that accrues and reduce the total cost of your loan. Since this approach could end up saving you thousands of dollars in the long run, using some of your summer job money to get a head start on paying your loans could be a smart thing to do. Rather than spending all the money you earn at your summer job, consider these options to help you save some of it instead. The earlier you start taking your finances seriously, the better off you'll be when you enter the real world.

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