A money survival guide for life after high school

Graduating from high school is a big milestone. Whether you’re going to college, a trade school, the military or straight into the workforce, here is a guide to help set a strong foundation for your finances.

Step one: assess your financial needs

Before opening accounts or choosing financial products, take time to understand what some essentials to living on your own are, along with whatever long- and short-term goals you have. You can start by listing out on a piece of paper or in your phone’s notes app:

• Living expenses: rent, food, transportation costs, cell phone bill or tuition costs, depending on your situation
• Short-term goals: travel to a new city or country, concert tickets or getting a tattoo
• Long-term goals: buy a car, purchase a home or go back to school

Once you’ve made a list of your living expenses and goals, you can then plan for achieving each by doing an assessment of where you are now and what you’ll need to do to reach your goals. You can use these resources to help:

• Read about and take our Financial Health Quiz to learn where you stand financially
• Learn how to create a flexible, values-based spending plan to align your money with your life and goals
• Educate yourself on ways to handle money stress for when you hit roadblocks, so that you can stay on track to financial independence

Step two: open a checking or savings account

Checking and savings accounts are the foundation of everyday money management. Together, they help you manage spending and save for the future. To open a checking and/or savings account, you can expect to:

• Complete an application either online or in person
• Verify your identity using a driver’s license, state identification card (if you do not have a driver's license), valid passport or military identification.
• Provide proof of your current address using either a recent bill or a copy of your lease
• Make an initial deposit (how you pay it and the amount required varies)
• Sign required documents
• Activate tools like online or mobile banking, debit cards and alerts

When learning the basics of how to use a checking account, finding one that can help buffer against overdraft fees can be a good option to start with. These types of accounts are an alternative to traditional checking accounts because they only give you access to what’s available in your account. This can protect against unintentional overspending and then paying a fee for having the financial institution cover the difference of the purchase.

Step three: manage your account(s)

Both checking and savings accounts play different roles and understanding those roles helps you stay in control. Savings accounts are designed for money you want to keep and grow over time. They earn interest and aren’t meant for frequent transactions. Checking accounts are for everyday activities like depositing money, paying bills, making purchases and accessing cash. To manage both your checking and savings accounts:

• Understand account terms and fees, and how to avoid them
• Keep track of deposits and withdrawals using online or mobile banking to regularly check real-time information about your account use.
• Review account statements monthly
• Set up Digital Banking alerts to stay informed about your money in real time

Step four: build your credit, safely

A credit report tracks how you manage borrowed money, and your credit score summarizes that history into a number lenders use to assess risk (i.e. will this person pay their bills on time?). Having a good credit history can help you access loans, jobs, housing, insurance and other essential services. People with higher credit scores tend to present less risk to creditors and can qualify for the best rates on loan products. Most credit scores are based on five factors:

1. Payment history – 35%
   Paying bills on time is vital to a good credit score. If you make on-time payments you can maintain a good payment history rating.
2. Credit usage – 30%
   Your credit score will be affected by how much money you have spent in comparison to the average credit limits on your credit cards or accounts. You can keep your credit utilization low by paying down balances as much as possible. If you have more than one credit card or loan, try spreading expenses across several cards to help keep each card’s utilization low. If you have unused cards, try to keep them open. Closing accounts reduces your total available credit and can negatively impact your score.
3. Credit mix – 10%
   By having a diverse mix of debt accounts, such as credit cards, auto loans, student loans or other types of credit, and keeping each in good standing, you can help improve your credit score.
4. Length of credit history – 15%
   As your credit accounts age, you’ll see your score increase over time. Try to keep any credit cards active by making a purchase on one every few months and then immediately paying it off. Inactive accounts might be closed by the lender, which can reduce your average credit age and lower your credit score.
5. New credit – 10%
   Every time you take out a new credit card or loan, it can lower your score temporarily, so be cautious about opening too many accounts at once. Additionally, part of your credit is based on the number of credit inquiries you have. An inquiry is when you or a company requests information from your credit report. There are two types of inquiries: a hard pull and a soft pull. Hard inquiries are made when applying for things like a credit card, car loan or home loan. These can temporarily lower your credit score. Soft inquiries are initiated by you or a lender to screen for pre-approval of things like insurance quotes, rental applications or employment verification. These do not impact your credit score.

Most people don’t have a credit report before age 18, but once you open a credit card or take out a student loan, your credit history begins. To protect and grow your credit in a safe way, be sure to pay bills on time, keep credit card balances below 30% utilization of the limit and check your credit report regularly to spot fraud or errors.

Step five: start investing

Investing is a long-term practice built on consistency and patience and works best when paired with emergency savings and manageable debt. Investments are what will help your money start working for you. Putting money into assets such as stocks, bonds or real estate is a method to growth wealth and combat inflation. Through “compound interest”—money earned on the principal amount invested, plus the accumulated interest from previous periods—you can significantly increase an initial deposit to reach long-term goals without having to worry about it.

For example, the stock market typically yields a 7% annual return on investments. If you were to invest $1,000 at age 20, and contribute nothing else, that principal amount would turn into $29,457 by age 70. If you continued to add a monthly contribution of $100—in addition to the compound interest of the stock market—that amount could potentially grow to $577,587.* If you get a job that offers an employer match on retirement contributions, it’s important to take advantage of that since it can increase the amount of money invested. You can learn more about how to get started investing by reading our Millennial and Gen-Z guide to Investing.

*Disclaimer: These are hypothetical examples. Historical market performance is not a guarantee of future results.

We’re here to help

As a Credit Human member, you can access digital banking as an all-in-one tool for financial management. You can view your credit score, add banking alerts and even add a no-overdraft checking account. Already have digital banking? Log in to set up these features. Want personalized guidance on checking, savings or building credit? That’s what we’re here for. Visit a Financial Health Center to create a personalized plan that fits your life, goals and values.