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Got a Summer Job? 3 Things to Do With Your Earnings

Maurie Backman, The Motley Fool

Working between college semesters gives you a great opportunity to make smart financial moves.

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Image source: Getty Images

Some college students take courses during the summer to get ahead on their studies. If you’re not going that route, your best bet is to find yourself a job and earn some money.

Many college students who work during the summer will inevitably blow their earnings on frivolous things like vacations, clothing, and gadgets. But you have a real opportunity to put that money to good use. Here are a few smart things to do with your cash.

1. Start chipping away at your student debt

If you took out student loans to fund your education, you need to pay them off eventually. You might think, “Oh, no big deal, I’ll just add those monthly payments into my budget and figure it out.” To be fair, that’s something many graduates are forced to do.

But if you take the money from your summer earnings and use it to start paying down your loans, you’ll have less debt to deal with once you graduate. That’s especially useful if you’re navigating adulthood on an entry-level salary.

Imagine that you lower your post-college monthly payments from $350 to $300 a month by applying your summertime earnings to your student loans. That extra $50 a month could be huge when you’re barely earning enough to make rent.

Furthermore, if your loans aren’t subsidized -- that is, you’re accruing interest on them during your studies -- it definitely pays to start chipping away at them as soon as you can.

2. Pay for your upcoming semester

Paying off part of your existing student debt is a smart thing to do with your summer earnings. At the same time, however, you can avoid more debt by using that money to pay for upcoming college costs.

For example, if you earn $3,000 over the summer, you can use that cash to pay your tuition bills in the fall or spring, reducing your future debt by that amount. You can also use your earnings to pay for expenses like books, travel to and from school, and food -- things you might otherwise have no choice but to charge on a credit card.

3. Build an emergency fund

College students need savings, too.

Is your car your transportation to and from class? Imagine that it breaks down and requires an expensive repair. Without money in the bank, you may be forced to charge unplanned bills on a credit card and rack up costly interest. A better bet is to build an emergency fund. You can use your summertime earnings to do just that.

How much money should you have on hand for emergencies? Most adults are advised to sock away a minimum of three months’ worth of living expenses.

As a college student, your monthly expenses are more variable. If you live at home during school breaks, for example, you won’t have the same expenses you do when you’re dorming. In that case, aim to have a few thousand dollars tucked away in the bank. This is especially crucial if you’re already financially independent and your parents aren’t picking up the tab for your living costs.

It’s tempting to spend your summer job earnings on something indulgent. But you might quickly regret it.

That said, there’s nothing wrong with using a portion of your earnings for something fun while saving most it for more responsible purposes. After all, you deserve at least a small reward for plugging away at a job all summer when you could’ve been bumming around having fun.

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