Lessons start now for recent graduates

I feel for the recent college graduates who have to make first-time financial decisions.

Not long ago I answered personal finance questions during an online discussion with some graduates. Here is a transcript of a few of the questions that had them stumped:

What do you suggest for a graduate who has no credit? I've never had a credit card. I've been rejected by two credit card companies because I have no credit history. I used a debit card throughout college because I didn't want to spend more than I had, but now I'm looking at getting an apartment, cellphone contract, car loan, etc. Any advice?

You should be very proud that you have no credit. That's not a bad thing. Repeat after me: Credit is evil -- necessary but evil. But alas, in this credit card nation you do have to eventually establish credit. So go to www.bankrate.com. In the search box, type in ''secured credit cards." You will get a list of banks and other lenders who offer credit cards backed by money you put in a savings or checking account. For example, you might get a credit card with a $500 credit limit and in return you have to deposit $500. Do that for a couple of months and the credit hounds will be hounding you to take their ''regular" credit cards.

What should be your first priority -- paying off loans or starting a savings account?

Do both. You need to pay down debt but also put money away for a rainy day. Why? Because it always rains. Sometimes it's that your car broke down and sometimes it's that you lose a job. But if you don't have a little piece of money saved when that rainy day does come, you will end up increasing your debt load (i.e., using your credit cards). So if you're new to the workforce, march up to the benefits office. Automatically have a set percentage of your paycheck (10 percent net if you can) deposited into a savings account. And then don't touch the money. Don't even get an ATM card for the account. Set that up and you will always have some money.

I have money in a 401(k) from a job I worked to put myself through college, and now that I graduated, I will have a 401(k) with my new employer. How do I move the funds into the new account? I'm really clueless about these things. I also have money in a similar retirement account. It has been sitting there for more than five years. Does it go away if you don't do anything?

First, get a good basic book on investing because you don't know what you're doing. (Try Andrew Tobias's ''The Only Investment Guide You'll Ever Need.") When you put money in a 401(k) or similar retirement account, it is your money. It's money you've invested.

As to the question of what to do with an old retirement account, go to the benefits office of your new employer and see whether you can roll over money from another 401(k). Sometimes you can't, sometimes you can. Once you know for sure, then look at the investment options being offered by your current employer. If you like what is being offered, and you can roll over funds from other accounts into your current plan, consider it. You could also leave the money where it is -- as you have been doing. You may decide to do that if you look at the portfolio and it's been performing just fine.

A third option is to withdraw the money from those other two accounts and open up a ''Rollover IRA." By doing this you maintain complete control over where and how the money is invested. Now if you choose the last option, do not have the checks made out to you. Rather, have the retirement plan administrator at your old jobs send the checks directly to whichever financial company you decided to open a rollover account with.

As a recent grad, I have a job with a nonprofit where salaries depend on various funding cycles. I get paid lump sums every few months. I have been prepaying rent with the lump sums first, then saving. My friends think I should invest the money and then pay out the rent as it becomes due. I'm hesitant to invest money I need to live on. What should I do?

Don't listen to your friends. You should not invest your rent money. You invest what you can afford to lose.

Michelle Singletary is a columnist for The Washington Post.