College students, make the most of your summer earnings

What you do with your paychecks in college can affect your financial life long after you toss your graduation cap. By saving money and repaying debt now, you're doing Future You a huge favor.

Of course, you need to take care of Present You, too. Set aside what you've budgeted for this year's expenses that aren't covered by financial aid or family contributions. And give yourself a high-five for making money in the first place.

If you have money left over or come into extra cash — thanks for the birthday check, Grandma! — here are a few ideas of what to do next. Keep in mind that everyone's financial situation is different, so some tips may be more relevant to you than others.

BUILD AN EMERGENCY FUND

Stash some of your earnings in a high-yield savings account that should be tapped only to cover unexpected expenses, like a car repair. (In a high-yield savings account, your money will earn more interest than in a traditional account — and you'll still be able to easily withdraw or transfer money when you have to pay for that new transmission.)

If you've earned a lot and can drop $500 into the account, you're off to a solid start. Or if it's more realistic to gradually build those savings — say, by automatically transferring $10 a month to it from your checking account — you'll still be in better shape than if you had no fund at all.

Without an emergency fund, you'd likely have to borrow money to cover curveballs, says Lynn Ballou, certified financial planner and senior vice president and partner with EP Wealth Advisors in Lafayette, California. "Those who end up in financial trouble at whatever point in life are those that have no emergency savings," she says.

PAY DOWN HIGH-INTEREST DEBT

Pay some of your extra earnings toward high-interest debts, like those that may come from credit cards or personal loans. You'll save money on interest, and you'll be headed toward a healthier credit score. Plus, as Ballou puts it, you don't want to start your adult life digging out of a financial hole.

If you don't have these kinds of debts, consider beginning to pay off student loans if you're able, says Erin Lowry , author of "Broke Millennial: Stop Scraping By and Get Your Financial Life Together." As long as you're enrolled in school, there's no penalty for starting to pay your loans and then stopping. So it's OK to pay a little bit every month or a single lump sum after a fruitful summer gig, Lowry says.

START SAVING FOR POST-COLLEGE LIFE

If you're contributing to an emergency fund and still have money to save, keep it in a separate account. These savings will be useful after college. "When you graduate, you'll probably need money immediately," Lowry says. "There's a lot of adult things that you suddenly have to do."

For housing alone, these "adult things" could be paying a security deposit and first month's rent, and perhaps a moving truck, renters insurance, furniture and utilities. Other expenses may include a car and a professional wardrobe.

To get a sense of how much to save, Lowry recommends researching the cost of living wherever you plan to live. (Make an educated guess if you're not sure yet.)

SPEND A BIT ON YOURSELF

Saving is important, but so is living life. As Lowry puts it: "Money is a tool that's meant to be used, and you can't constantly focus on the future."

You're about as free as you're ever going to be if you don't have kids, pets, mortgage payments or a salaried job. So Ballou suggests using this time and some of your earnings to travel. "You'll never ever get an employer who will tell you, 'You know what, I think you deserve a gap year,'" she says.

Certified financial planner Marguerita Cheng recommends using or saving up extra earnings for experiences, rather than things. "Instead of buying the latest and greatest iPhone ... maybe you save that to go on a nice trip with your friends after you graduate," says Cheng, who is the CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland.

If traveling is too expensive for you, spend some of your income on going out with friends, Lowry says, and otherwise "investing in the experiences of being in college."

This article was provided to The Associated Press by the personal finance website NerdWallet. Laura McMullen is a writer at NerdWallet. Email: [email protected]. Twitter: @lauramcmullen

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