The college graduation season is a wonderful moment for graduates and their parents. Even though there seems to be a certain cynicism about the worth of college commencement speeches — they are what they are, right? — I enjoy reading and listening to the insights.

Don’t worry. I won’t try for soaring rhetoric about personal finances for newly minted college graduates in this column. Instead, my advice is much more prosaic, geared toward the fundamentals. I want to establish for college graduates a framework for managing money well now and in the future.

The bedrock idea in personal finance is creating a margin of safety. A regular savings habit — even small sums — is critical for constructing a margin of financial safety. One reason for embracing savings early on is that young adults leave and lose jobs a lot. For instance, from 1990 to 2014 the monthly unemployment rate for 20- to 24-year-olds averaged 10 percent, according to Research Affiliates.

A margin of safety isn’t only protecting against downside risk. The savings eventually becomes an “opportunity fund,” money that lets you pursue intriguing opportunities, take career risks and embrace changes that could lead to greater fulfillment.

I want to highlight one other approach: Generosity or giving. When we think about giving away our money, we ask all the right questions. How would we like the world to be a better place? What kind of legacy do we want to leave? Giving also breaks the hold money can have on us. You should ask the same “giving” questions when it comes to the rest of your money choices — spending and saving.

My other personal finance suggestions are:

Keep it simple.

Green is frugal and frugal is green.

Save for retirement.

Pay your credit card balance in full every month.

Buy inexpensive, well diversified index funds.

Pay attention to fees.

Stick with high-quality investments.

Invest in skills for the kind of career(s) and job(s) you want over time.

Borrow to fund investments — a home and education — but be disciplined.

Diversify. Diversify. Diversify.

This approach to money will help you accomplish your goals. Good luck with your new adventures.


Chris Farrell is senior economics contributor, Marketplace, and economics commentator, Minnesota Public Radio.