Student learning curve
This article is about starting postsecondary students off right.
Many high school graduates are off to university or college and now have to make payments, be swamped with credit card offers, have student loans and learn to stretch their money over a longer term.
With a son in Grade 11, I am thinking of what he will need to know. That’s why this topic is something I’m very interested in.
Young adults start out for the most part with no debt. Credit puts you into debt extremely quickly, before you fully understand all the costs and impacts to your future. Some debts are good and are worth the investment for your future. These include student loans (don’t go overboard, put some money in yourself), mortgages and lines of credit used for investing.
The bad loans are ones used to purchase something before paying for it with cash. Credit cards are the biggest culprit for bad debt. Yes, they can be used properly and if you do use them that way, that is fantastic. Paying off the monthly balance is the No. 1 requirement of responsible credit card use. Unfortunately a lot of people don’t.
So it’s best just to stay away from credit cards early on. Learn how to manage cash, get your bills paid on time (set up recurring payments from your chequing account each month) and start planning what you want to save for. Some of that savings should be for investing and a down payment.
As you start to have items in your name (hydro bill, rent and phone) and you are paying them on time each month, you will start to build up your credit history and rating. There are several reasons to have a good credit rating and paying bills on time and in full is a great way to improve your score.
Anytime you apply for some sort of credit, your credit report is looked at. Be restrictive of who looks at your credit rating – that can lower your score. You want a good rating because you’ll need it for a mortgage for example. Something very important to remember is that many landlords also look at your credit score when evaluating you for a rental unit.
Student loans are another thing to learn all you can about. Paying it off sooner, rather than later because it doesn’t cost much per month will be very expensive over the long run. Better to pay it off as quickly as you can, and do what you can to pitch in and pay for school with cash as well.
There are lots of calculators online to check out the different scenario’s of interest amounts and school loans. Check one out.
So there is the start of my money fundamentals for getting started on the right side of the bottom line.
Kathi Bridge is a money coach and educator with Money Coaches Canada. This article is provided for information purposes only. Please consult with a professional advisor before implementing a strategy.