5 Smart Things to Do With Your Summer Job Earnings

Back in college, many of my friends opted to take summers off and enjoy a break from their studies. I, on the other hand, always made sure to land a summer job and make the most of the money I earned. As such, I was able to limit my student debt, build some savings at a young age, and gain valuable experience that made it easier for me to get a job once I graduated.

If you have the summer off during college or even high school for that matter, it pays to go out and find work. But don't just blow your paychecks -- you have a real opportunity to put your earnings to good use. Here's how.

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1. Pay your tuition bills

The summer before my senior year of college, I worked for an investment banking firm and held down a pretty grueling schedule. On the plus side, I wound up making enough money to cover my tuition bills for the upcoming year, which prevented me from taking out additional loans.

If you're sitting on a sizable chunk of cash from your summer gig and know you're still on the hook for some whopping tuition bills, using that money to pay them directly could minimize your student debt load. And that's something you'll be grateful for when your monthly loan payments are much lower than those of your fellow graduates.

2. Get out of credit card debt

When you're a student, it's easy to fall into the trap of racking up credit card debt. After all, at this stage of life, your income is probably limited or non-existent, and it's natural to get tempted to fall back on a credit card when a sudden expense pops up.

The problem with carrying credit card debt, however, is that it can kick-start a vicious cycle where you're accruing interest at rapid speed, thereby digging yourself further into an already undesirable hole. Therefore, if you're able to earn enough money over the summer to pay off your existing balance, it makes sense to knock it out and stop the bleeding.

3. Build an emergency fund

No matter your age, there's a good chance you'll encounter an unplanned expense at some point in the not-so-distant future, whether it's a car repair or a medical bill. And if you don't have some cash reserves, you may have no choice but to -- you guessed it -- rack up credit card debt just to cover it. That's why it pays to use your summer cash to build your emergency fund -- a fund that should, ideally, have enough money to cover at least three months' worth of living expenses.

If amassing that much over a single summer isn't feasible, do the best you can. Similarly, if you don't have living expenses in the classic sense because you're still a full-time student and your parents pay your bills at present, aim to save as much as you can so that money is available when you need it. Chances are that you'll be on the hook for your own bills once you graduate, even if that's not the case now, and having that safety net will protect you from debt when you're first starting out in the real world.

4. Save for retirement

Retirement is probably the last thing on your mind if you're a student. But it's never too early to start building long-term savings, and the sooner you do, the more opportunity your money will have to grow. One thing to keep in mind is that you're better off prioritizing emergency savings and paying off debt before funding a retirement plan. But if you're solid in those areas, socking away your summer earnings could go a long way over time.

Imagine you earn $3,000 over the summer and decide to stick it in an IRA. Even if you don't manage to contribute another dime, if you invest that money at an average annual 7% return and leave it alone for 50 years, you'll wind up with over $88,000 by the time retirement rolls around. In reality, $88,000 isn't a lot of money in the grand scheme of what could be a 30-year retirement or longer. But it's definitely a nice start, so if you don't have a more pressing need for that money, you could use it to set yourself up for the future.

5. Invest in tools that'll help you excel in your studies

While it's good to be mindful of the future, your primary focus as a student should be to do well in school. That's why it's wise to use your summer job earnings to buy the tools you need to succeed academically. Maybe you could use a new laptop because your old one is slow and crashes frequently. Or maybe a nice pair of noise-canceling headphones will set the stage for distraction-free studying. No matter what it is you specifically need, you're much better off spending your money on educational tools than random gadgets.

Tempting as it may be to relax during the summer, having that break from school offers a solid chance to earn some serious bucks. So don't blow it. Take that summer job and use your earnings wisely. You'll be thankful you did, just like I was.