Priceless advice for your first paycheck

  • By Michelle Singletary
  • Friday, May 13, 2016 11:28am
  • Business
Michelle Singletary

Michelle Singletary

Remember when you sat in the human resources department at your first real job and faced that pile of paperwork?

I was fortunate. Before I started working as a reporter, my grandmother, Big Mama, passed along — well, drilled into me — three money lessons. They laid the groundwork for a lifetime of financial security.

For college grads and other young folk entering the workforce, here’s her priceless advice.

Spread your money around. Big Mama told me to get four banking accounts at two different institutions.

The first two — checking and savings — should be with the same bank/institution. (Search around for no-fee options.) Use them for your regular expenses.

Store money you’ll need later in the savings account. If, for example, you pay car insurance twice a year, keep the funds in the savings account and transfer them into checking when the bill is due.

However, be aware of federal limits for savings withdrawals. You can make only six transfers and withdrawals per month or statement period before being charged a fee.

As for the other two accounts — again, one checking and one savings — designate them as your “just in case” money. Keep these funds at a different institution so they’re not mixed with your main accounts. Having this cash separate will help remind you that it isn’t supposed to be used for everyday stuff.

You might consider opening these accounts at a credit union where membership has advantages. If you want to borrow money — say, for a used car — it may offer lower interest rates than your local bank.

Go to culookup.com to check if you’re eligible to join a credit union.

Call the second checking account your “life-happens fund.” Set a goal to save $1,000. As your lifestyle needs and wants grow, increase this pot. It’s where you’ll keep money for expenses you don’t expect. And don’t feel guilty about withdrawing from this account — it’s meant to be a supplement to your main checking and savings.

In the second savings account, you’ll deposit your emergency money or rainy-day funds. Starting out, set a goal of at least one month’s worth of living expenses. (Eventually save up to three to six months’.) You won’t touch this money unless you are in dire need, for example if you lose your job. Leave the ATM cards for these accounts at home.

Set it and forget it. On your first day on the job, while you’re filling out the paperwork, have your wages directly deposited into the two checking accounts. You might need to request a special form to split the deposits.

A survey by NACHA, an electronic payments association, found that a majority of people said splitting their deposits helped them save. But the poll also found many workers aren’t aware they can split deposits.

If your employer doesn’t offer the option to direct-deposit your pay into multiple institutions, you’ll have to set up automatic transfers on your own. With online banking, this is easy to do.

Save for retirement from the start. Big Mama taught me to take money away from myself, starting with my first paycheck, so I’d get used to living on less.

Also, on your first day at work, sign up for the retirement plan. Aim to put in at least enough to get the maximum company match. But if that’s too much, just save something. It is important to create the habit.

If your employer doesn’t offer a retirement account, you can get your own starter account, called a “myRA.” To sign up, go to myra.gov.

Pay it forward. Pass along Big Mama’s financial readiness tips to college graduates or young adults you know. It will be their saving grace.

Washington Post Writers Group

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Black Press Media operates Sound Publishing, the largest community news organization in Washington State with dailies and community news outlets in Alaska.
Black Press Media concludes transition of ownership

Black Press Media, which operates Sound Publishing, completed its sale Monday (March 25), following the formerly announced corporate restructuring.

Maygen Hetherington, executive director of the Historic Downtown Snohomish Association, laughs during an interview in her office on Thursday, Feb. 15, 2024, in Snohomish, Washington. (Ryan Berry / The Herald)
Maygen Hetherington: tireless advocate for the city of Snohomish

Historic Downtown Snohomish Association receives the Opportunity Lives Here award from Economic Alliance.

FILE - Washington Secretary of State Steve Hobbs poses in front of photos of the 15 people who previously held the office on Nov. 22, 2021, after he was sworn in at the Capitol in Olympia, Wash. Hobbs faces several challengers as he runs for election to the office he was appointed to last fall. (AP Photo/Ted S. Warren, File)
Secretary of State Steve Hobbs: ‘I wanted to serve my country’

Hobbs, a former Lake Stevens senator, is the recipient of the Henry M. Jackson Award from Economic Alliance Snohomish County.

Mark Duffy poses for a photo in his office at the Mountain Pacific Bank headquarters on Wednesday, Feb. 14, 2024 in Everett, Washington. (Annie Barker / The Herald)
Mark Duffy: Building a hometown bank; giving kids an opportunity

Mountain Pacific Bank’s founder is the recipient of the Fluke Award from Economic Alliance Snohomish County.

Barb Tolbert poses for a photo at Silver Scoop Ice Cream on Thursday, Feb. 29, 2024 in Arlington, Washington. (Annie Barker / The Herald)
Barb Tolbert: Former mayor piloted Arlington out of economic brink

Tolbert won the Elson S. Floyd Award, honoring a leader who has “created lasting opportunities” for the underserved.

Photo provided by 
Economic Alliance
Economic Alliance presented one of the Washington Rising Stem Awards to Katie Larios, a senior at Mountlake Terrace High School.
Mountlake Terrace High School senior wins state STEM award

Katie Larios was honored at an Economic Alliance gathering: “A champion for other young women of color in STEM.”

The Westwood Rainier is one of the seven ships in the Westwood line. The ships serve ports in the Pacific Northwest and Northeast Asia. (Photo provided by Swire Shipping)
Westwood Shipping Lines, an Everett mainstay, has new name

The four green-hulled Westwood vessels will keep their names, but the ships will display the Swire Shipping flag.

A Keyport ship docked at Lake Union in Seattle in June 2018. The ship spends most of the year in Alaska harvesting Golden King crab in the Bering Sea. During the summer it ties up for maintenance and repairs at Lake Union. (Keyport LLC)
In crabbers’ turbulent moment, Edmonds seafood processor ‘saved our season’

When a processing plant in Alaska closed, Edmonds-based business Keyport stepped up to solve a “no-win situation.”

Angela Harris, Executive Director of the Port of Edmonds, stands at the port’s marina on Wednesday, Jan. 24, 2024, in Edmonds, Washington. (Ryan Berry / The Herald)
Leadership, love for the Port of Edmonds got exec the job

Shoring up an aging seawall is the first order of business for Angela Harris, the first woman to lead the Edmonds port.

The Cascade Warbirds fly over Naval Station Everett. (Sue Misao / The Herald file)
Bothell High School senior awarded $2,500 to keep on flying

Cascade Warbirds scholarship helps students 16-21 continue flight training and earn a private pilot’s certificate.

Rachel Gardner, the owner of Musicology Co., a new music boutique record store on Thursday, Jan. 18, 2024 in Edmonds, Washington. Musicology Co. will open in February, selling used and new vinyl, CDs and other music-related merchandise. (Olivia Vanni / The Herald)
New Edmonds record shop intends to be a ‘destination for every musician’

Rachel Gardner opened Musicology Co. this month, filling a record store gap in Edmonds.

MyMyToyStore.com owner Tom Harrison at his brick and mortar storefront on Tuesday, Sept. 6, 2022 in Everett, Washington. (Olivia Vanni / The Herald)
Burst pipe permanently closes downtown Everett toy store

After a pipe flooded the store, MyMyToystore in downtown Everett closed. Owner Tom Harrison is already on to his next venture.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.