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7 Smart Ways to Spend Your Graduation Money (to Get Ahead)

Smart ways to spend your graduation money that’ll help you both now and in your next step in life.

I love that you are searching for smart ways to spend your graduation money.

high school student girl at desk, text overlay "7 smart ways to spend graduation money"

It means you’re thinking ahead – whether you’re the one graduating high school or college, OR, you’re a parent of a teenager/young adult and want to help guide them in the best way to use their new resource.

So, how do you determine the best way to use your graduation money? Let’s talk about that first, then dig into specifics.

Best Ways to Use Your Graduation Money

Did you get some cool graduation money cards…filled with cash?

There are many ideas below for very smart ways to use a chunk of graduation money.

But, what determines which is the “best” way for you, personally, to spend your graduation money?

I’m glad you asked.

Step #1: List Your Wants & Needs

First, you want to make a list of what you want and need both now and within the next 2 years.

Could be moving into your first apartment. Could be going to college. Could be to start a new job.

Could be to fix the A/C in your car before summer hits…

Step #2: Prioritize the List

Quickly write down a few things that need to be purchased in order to make each item on your list happen.

  • What do you need to spend money on to get into your first apartment?
  • What would you need to get a car?
  • What do you need to start your new job?

Next, you’ll need to prioritize this list. Which ones are needs, and which ones are wants? Or which ones are nice-to-have’s, and which are must-have’s?

Step #3: List Out Your Resources

Finally, you’ll want to look at your current resources and “pledged” resources from relatives, friends, scholarships/grants, organizations, etc. that can help you.

If Dad and Mom said they’ll buy your textbooks each semester, then make a note of that. If your uncle and aunt told you they’ll buy you a laptop, then make a note of that.

How much money do you have in savings currently? What’s in your checking account?

Step #4: Get Out Your Highlighter

After you look at all of that, what’s left to purchase? Now, what’s left to purchase that’s the highest priority?

Get out your good ol’ highlighter, and highlight those items.

Keep them in mind as we go through the specific ways to spend your graduation money below.

Smart Ways to Spend Your Graduation Money

So, what exactly are your options for smart ways to spend that graduation money?

You’ll want to pick something that:

  • Supports the future version of yourself you want
  • Helps (at least a little) with current financial needs
  • Increases your choices and options either now, or in the future

Here’s several good ideas.

1. Put it in a High-Interest-Earning Savings Account While You Decide

If your teen is in the middle of deciding how best to use their money, OR, they want to save most of it for a future purpose, then it’s best to start making it work from them.

Open an online savings account with the highest interest rate you can find (ours is earning 3.9% APY right now, and you might find slightly higher than that), then put your money there.

It’s safe and sound (as long as the account is FDIC insured – most are, but check), and earning a few bucks a month while you decide what to do with it. What’s better than that?

2. Buy One Upgrade

I’m not talking about going crazy here. Because there are far smarter uses for your money than blowing it on a new Xbox.

BUT, you likely have never had this much money in your life.

Spending huge amounts of money and spending no money at all are two extremes that you shouldn’t live in long. Neither of them are sustainable.

And it can sometimes do more harm than good to pinch pennies for years because one day, you just snap the other way (it’s like an invisible rubber band).

Not only that, but graduating from high school, college, grad school or wherever is a big deal. You need to celebrate that accomplishment a bit!

Look around your current life. What’s one thing that, if you upgraded (at a reasonable price), would make a world of difference to you?

Choose to do that.

Psst: when I graduated college and got my first job? I splurged on a $99 Down Comforter that I still own today. It was such an awesome purchase and made me feel like a million bucks.

3. Use it to Invest in Your Future Earning Potential

You’ve got a lotta earning years ahead of you. That means that any education you invest in right now – college, trade school, online courses, apprenticeships, etc. – will pay you back big time, since your entire career lays out in front of you.

Now, I realize you just graduated from some form of education. BUT, that doesn’t mean you’ve got all the skills you’ll need for the rest of your life.

For example, I had already graduated college and worked for one organization for a year, when I needed to find a new job (was laid-off, because my position was grant funded and they lost the grant).

To help me score my next job? I needed to take an online excel course. I paid the $37 or so, and majorly brushed up on my excel skills. Landed the job.

Not only did I use those skills everyday at that job (in market research), but I still use those same excel skills – and have built upon them – in my current job as a blogger!

Other ways you can invest in your education:

  • 4-year or 2-year college
  • Graduate school
  • Trade school
  • A cooking class (you’ve got a lot of eating years ahead of you – how much money could you save over the next 40+ years because you learned cooking skills that make you want to cook at home more than eat out?)
  • A class for a particular skill set that’s in demand (coding, Virtual Assistant for an online business, graphic design, creating and selling printables online, etc.)

4. Fund an Emergency Savings Account

One of my business mentors, Faith Mariah, likes to say “Life is gonna life”.

And she’s entirely right.

When I think back to my own twenties, I can easily name several unexpected expenses that crept up:

  • New tires to replace the balding ones on my beater car
  • Being laid off (twice) and needing to pay for rent without a paycheck
  • A stone hitting my windshield on the highway, and having to cover the repair cost so my car could pass inspection

While none of these might be common teen expenses, they certainly could happen in young adulthood – a time when your paycheck might be just enough to cover your monthly living costs.

Make yourself a small emergency fund now, so that you don’t end up calling home to your parents for a speeding ticket (if you even have that luxury!).

Hint: a good place to start? Add up each of your insurance deductibles for auto, renter’s, health, etc. that you’re responsible for before your insurance kicks in, and make sure you have at least that in a savings account.

5. Chip Away at a Large Upcoming Cost

There are several big expenses you have coming up, whether you’re going to college, graduated from college, or going straight into a job.

A few that come to mind include renting an apartment, buying a car, relocation expenses, college tuition, etc.

You could use your money towards:

  • Buying college textbooks
  • Buying a used car
  • Putting first month’s/last month’s/deposit down on an apartment
  • Wardrobe upgrades for an office job
  • Computer/laptop (I saved up $800 and bought myself a computer the summer after graduating from high school so that I would have one for college – a great investment!)

Psst: here are more financial tips for high school students.

6. Start a Roth IRA

You may think that starting a retirement fund at your age is ludicrous. But hear me out on this one – I started mine at 23, and now that I’m middle-aged? I’m SO happy that I did.

In fact, I wish I had started as a teen.

Investing in a Roth, specifically, is a great idea because there’s some flexibility.

With a Roth IRA:

  • Your contributions and earnings on the money grow tax-free, forever (which is an amazing benefit since you’re so young and your earnings will almost inevitably go up)
  • Contributions (not the earnings on those contributions) can be withdrawn at any time, with no tax penalty – so your money isn't necessarily tied up forever

Maybe it’s just a few hundred bucks you put in. BUT, you’ll now have an established retirement account that you can easily set up automatic contributions to once you have a full-time job.

And trust me – just getting the account setup and in place is half the battle. Not that it’s difficult to do, but it’s a “mental obstacle” that can hold people back for years from getting started, costing them lots of money down the road in earnings.

FYI: you do need to have earned income in the year that you contribute to a Roth IRA. And, if you’re still a minor, then parents will have to help by opening a custodial account on your behalf. Here’s more info.

7. Buy Equipment for a Side Hustle

You’re young, and likely with no family yet. Maybe you’re heading off to college, or maybe you’re taking on your first job.

Right now is a great time to learn a side hustle and boost your paycheck earnings.

You can use the extra money to make ends meet, save up for your future downpayment on a home, save up for travel in your week off from work or during spring break, and for so many other things.

  • Photography equipment
  • Laptop/computer/printer for blogging, graphic design, VA (virtual assistant) positions, etc.
  • CPR certification course for babysitting

Psst: you won’t get rich, but you can earn some side money with these online jobs that pay teenagers.

Bonus: Save for Saving’s Sake

I see money as the gatekeeper to an endless number of possibilities in the future.

If you have enough of it saved, then when an opportunity strikes – like getting an apartment with a friend, going on a study abroad trip in college, or moving to take a cool job position – you can say “yes” to it.

Examples of things in my life I was able to say “yes” to because I had been saving for no other reason than just to save:

  • Move from Maryland all the way to gorgeous Florida for a good job opportunity (after an unexpected lay off)
  • Go to Jamaica for a week in the first year of working after graduating college (after finding a random, really good deal online)
  • Fly from Florida back to PA several times for my best friend’s wedding

So sometimes, saving your money when you have absolutely no idea what you’ll do with it – instead of piddling it away on things here and there – sets you up for a magical future.

And I truly want that for you.

Psst: there are also great reasons to save – here are 9 reasons to save your money as a teenager.

Which one of these smart ways to spend your graduation money make sense according to your needs and wants list? Which one are you most excited about?

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Amanda L. Grossman is a writer and Certified Financial Education Instructor, a 2017 Plutus Foundation Grant Recipient, and founder of Money Prodigy. Her money work has been featured on Experian, GoBankingRates, PT Money,, Rockstar Finance, the Houston Chronicle, and Colonial Life. Amanda is the founder and CEO of Frugal Confessions, LLC. Read more here or on LinkedIn.