Should Graduates Spend or Save Their Gift Money? 14 Strategies to Consider

While graduating from school is a major milestone in your life, it's not the last big step you'll take in the months ahead. Preparing yourself for your future can take any number of pathways depending on your specific goals. But whether you'll be buying a new car, saving up for a home or delving into the stock market, there are a few key financial steps you can take that will help you achieve success.

As noted leaders in the financial space, the members of Kiplinger Advisor Collective recommend taking one or more of the following actions with any gift money you may have received for graduation. Doing so will help you start adulthood — and your financial future — off on the right foot.

Invest early

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"Start investing early if you want financial security. The key is to let compound interest work its magic through broad index funds or exchange-traded funds while using the right investment accounts, such as Roth IRAs, which serve as both investment and super emergency savings accounts. Contributions are penalty and tax-free, and the principal and earnings grow tax-free over time. Remember, finance can come off as daunting because of the jargon, but don't be afraid to ask questions. The more informed you are, the better financial decisions you'll make." — Ramona Ortega, My Money My Future

Take advantage of interest rates

"Take advantage of the highest interest rates possible with the most financially sound bank or credit union. Then, save or spend the interest. If the money is not needed, max out a Roth IRA or Roth 401(k) for retirement. If the student is a parent, buy life insurance while it's cheap." — Shawn Plummer, The Annuity Expert

Sharpen your income-producing skills and knowledge

"The best thing a young person can invest in is their skills and education, namely their income-producing skills and financial education. These two investments will show them how to make, save and invest millions more dollars over the course of their lifetime. Making this investment at an early age will compound their returns since they have so much time on their side." — Tyler Wright, Defining Wealth LLC

Leverage a high-yield savings account

"Right now, the best thing you can do is put your financial gifts into a high-yield savings account that earns at least 4% interest. This return is the highest we’ve seen in 15 years and close to the inflation rate, so your money won’t lose value while you decide what to do with it next." — Andrew Schrage, Money Crashers LLC

Build your net worth

"Investing in things like real estate or assets that will build your net worth that you could borrow against is always a valuable start to your career. If you can create passive income from these assets, it can set you up for long-term success with a steady flow of cash." — Angela Ruth, Due

Start a side business

"Invest in yourself. I would recommend starting a business or a side hustle as soon as you can. The education you receive from launching and running your own business is priceless." — Clay Bethune, Fintech Finance Group

Consider your time horizon

"The monetary gifts that high school- and college-aged students want to invest should be looked at in the context of how long their time horizon is. If they're looking to save for short-term time horizons, CDs and short-term bond funds should be reviewed. For time horizons over six to 10 years, I'd recommend students invest the gifts in a Roth IRA if they have any earned income. Roth IRAs have the benefit of growing tax-deferred and can be withdrawn at retirement tax-free to complement traditional IRAs and 401(k)s. Otherwise, I would suggest allocating over multiple mutual funds and/or ETFs." — Eric Kala, Avid Wealth Partners

Consider keeping your gift in cash

"Consider keeping that money in cash to form a financial foundation. This will also give you the flexibility to navigate the job market and your adult life." — Douglas Boneparth, Bone Fide Wealth, LLC

Kiplinger Advisor Collective is the premier criteria-based professional organization for personal finance advisors, managers, and executives. Learn more >

Think about what your future entails

"Invest in what will be most significant to you in regard to where you want to be in the future. Whether you want to start a business, get a rental or attend college, you want to make sure those goals are taken care of by investing for the future." — Nicholle Overkamp, Wilcox Financial Group, LLC

Do everything in moderation

"I am a firm believer in saving, but I also think moderation is key. When you receive financial gifts, use a small amount to treat yourself. You can save the rest in a high-yield savings account, retirement fund or in a well-placed investment." — Trae Bodge, Trae Bodge Media, LLC

Keep cash in a liquid account

"High school and college graduates should consider keeping their monetary gifts in a liquid account following graduation. Let's be real — the costs of attending a trade school, college or university are rising, and having extra cash to "invest" in their college experience, cut down on the cost of books, set up their next living arrangements or have extra cash to enjoy life is definitely a great way to celebrate the accomplishments." — Lyndsey Monahan, Women Inspire Wealth

Do your research

"Read about different investment strategies (value, growth, index, tactical, etc.) and pick one that makes sense to you. This way, you can have a consistent approach and the discipline to invest your money." — Bill Hortz, Institute for Innovation Development

Cover short-, mid- and long-term strategies

"I recommend separating those savings between short-term, mid-term and long-term strategies. By doing this, they can take care of immediate needs and also get a head start with compound interest." — Maria Puche, Wealth Armor

Invest in your well-being

"The best place you can invest in is yourself, your education, your peer group and your health. Any of these areas can make a dramatic impact on the long-term success you can have. Investing in your education may come in the form of actually using that money to buy assets that ideally produce some sort of cash flow such as real estate or low-maintenance operating companies. In some cases, it just involves a down payment to make that investment or you can find a seller to finance the deal with no money down." — Justin Donald, Lifestyle Investor