Financial Planning for Graduating High School Students
Congrats, class of 2025! It's a time filled with excitement, dreams, and, inevitably, financial responsibilities. As you stand on the threshold of this new chapter, understanding how to manage and build your financial future is crucial. This is where Encompass Credit Union steps in, offering guidance and resources tailored to Indiana's young adults who are just beginning their journey.
Building Savings
The cornerstone of financial security is a robust savings account, it’s never too early. Having a savings account isn’t just about putting money aside; it’s a fundamental part of ensuring a stable and secure financial future. Savings give you the flexibility to navigate life’s unpredictable challenges without the need to incur debt that could throw off your financial stability.
The benefits of a high-yield savings account are manifold. Firstly, it encourages the habit of saving by offering more attractive returns on the saved money, essentially rewarding you for your prudence. Additionally, with high-yield savings accounts often insured by entities like the FDIC or NCUA up to certain limits, they provide a secure way to build your savings. This security, combined with higher growth potential, makes them an ideal choice for long-term financial planning, helping young adults like you establish a solid foundation for wealth accumulation early in life.
Setting Financial Goals
Creating financial goals is like having a roadmap for your future. Whether it's saving for college, a car, travel, or simply financial cushioning, setting clear targets is crucial. Establish a budget to channel your earnings towards these goals efficiently. It may seem daunting initially, but the discipline pays off in unparalleled financial freedom. Here are a few things to think about when you want to start a savings.
Establish an Emergency Fund: Aim to set aside three to six months’ worth of living expenses in a dedicated savings account. This fund acts as a financial safety net for unexpected events like medical emergencies, urgent car repairs, or unemployment.
Pay Off High-Interest Debt: Prioritize paying off high-interest debts such as credit card balances, personal loans, or payday loans. Eliminating these debts can significantly reduce the amount you pay in interest and free up more of your income.
Start Saving for Retirement: Even though retirement may seem far away, starting early can have a profound impact due to the power of compound interest. Consider contributing to retirement accounts such as a 401(k), especially if your employer offers a match, or opening an Individual Retirement Account (IRA).
Create a Budget and Stick to it: Developing a budget helps you track your income and expenses, ensuring you live within your means. This habit is crucial for long-term financial health and can help you allocate funds more effectively to your various financial goals.
Save for Major Purchases: Whether it’s buying a car, owning a home, or funding a dream vacation, start setting aside money for big purchases. Planning and saving in advance can help you avoid taking on high-interest debt and make these goals more attainable without financial stress.
Starting an Emergency Fund
Life is full of unexpected events, and an emergency fund acts as a financial safety net. Start by setting aside a small portion of your income or savings into this fund. Over time, aim to have enough to cover at least three to six months of living expenses. This fund will ensure you're prepared for the unforeseen without derailing your financial goals.
Start Building Credit
An essential aspect of financial health is a good credit score, which requires a history of responsible credit usage. Opening your first credit card is a significant first step. It might seem counterintuitive to borrow to build savings, but when managed wisely, a credit card is a tool that can help establish a positive credit history.
Apply for Encompass' MasterCard
For those stepping into the world of credit, our Encompass Mastercard offers everything you need. It's designed with young adults in mind, providing a safe and beneficial way to start building credit. With competitive rates and designed to promote responsible spending, it's an excellent first credit card.
Factors That Impact Your Credit Score
Your credit score is determined by several factors, including payment history, credit utilization ratio, length of credit history, new credit accounts, and credit mix. Understanding these can help you make informed decisions that positively impact your score.
Additionally, shared secured loans can also be a credit builder. A share-secured loan is a type of loan where the borrower can use funds located in a savings or share account as collateral for the bank. This means the financial institution holds a portion of the borrower's savings account as security for the loan. This can allow account holders to borrow money without completely depleting their savings.
Scholarships and Student Loans
Higher education is an investment in your future but comes with its own financial challenges. Scholarships and student loans become crucial in this journey. The Encompass Walter E. York Memorial Scholarship offers a helping hand to graduating high school seniors in our communities. This non-renewable scholarship lightens the load, making college, university, vocational, or technical education more accessible.
How Student Loans Work
Student loans are borrowed money that must be repaid, often with interest. It's vital to understand the terms and choose wisely to minimize debt upon graduation. Indiana high schoolers can apply for federal and private loans, each with different benefits and considerations.
The Advantage of Banking with a Credit Union
Financial Literacy and Planning
Encompass Credit Union is committed to empowering young members with financial literacy. By providing resources and guidance, we ensure you're informed and confident about your financial decisions.
Better Rates and Savings
As a credit union, Encompass typically offers better savings and interest rates compared to big banks. These favorable terms mean your money works harder for you, right from the start.
Community and Member Ownership
Credit unions are deeply rooted in their communities and are member-owned. This means we are directly accountable to you, our members, and not to external shareholders. Every decision made is with your best interest in mind, reflecting our commitment to your financial success.
Your journey post-high school is filled with potential and promise. By making informed financial decisions early on, you set a foundation of security and success. Encompass Credit Union is here to guide you through every step, from opening your first savings account to applying for scholarships and building credit. Together, we can navigate the complexities of financial planning, ensuring you're prepared for whatever tomorrow holds.
Remember, the steps you take today shape your financial landscape for years to come. Start on the right foot with Encompass Credit Union, where your financial future is our priority. Join us, and let's embark on this exciting journey together.
Encompass Credit Union stands ready to assist you in navigating your loan options, ensuring you get the most out of a personal loan while being able to handle it responsibly. Remember, a strong financial future is built on making informed decisions today. To learn more or to apply for a personal loan that suits your needs, reach out to us by calling us at (800) 675-8852 or emailing info@encompasscu.org or visit Encompass Credit Union and let us help you take control of your financial journey.