Lesson of great interest for our school leavers

HIGH school is almost over for hundreds of thousands of young Australians, sparking the need for some fresh lessons about managing their money.

Final exams end in less than a month, and while financial literacy programs in many schools have improved in the past 10 years, MyBudget director Tammy Barton said most children learned through experience of their parents and peers, with some ending up buried in debt.

She said school leavers should be taught about credit cards before they turned 18 and started receiving new card offers in the mail.

“Credit cards are one of the most common causes of financial stress in Australia and young people are especially vulnerable,” Ms Barton said.

“Most people understand the concept that a credit card is a loan and that the money needs to be paid back, but many people don’t fully understand that making only the minimum monthly repayment can lock them into decades of debt and thousands of dollars in interest charges.”

Most school leavers already have a mobile phone, but when parents stop paying the bills problems can arise.

Ms Barton said phone owners should be careful of added extras and understand the need for insurance.

“A lot of people are also unaware that telephone companies are among some of the quickest creditors to put a black mark on your credit file for paying bills late or defaulting,” she said.

Certified financial planner Patrick Canion said parents could still play a vital role with school leavers who remained at home.

“Some parents want their kids to stand alone when they are 18, others agree to fund their education,” Mr Canion said.

“The key is transparency and understanding that it is usually harder for the parent than the child to stick to the plan.”

He recommended school leavers start a savings account without card access that could be used to begin investing early, get a credit card with a low credit limit to build a good credit rating, but make sure all card debt was repaid before interest was charged.

“Read. Nobody will care more about your money than you do, so you owe it to yourself to understand how it works,” Mr Canion said.

“Read everything you can about finance, even if it doesn’t initially make sense. Within three months, you’ll know more than 90 per cent of adults about how money works.”

Ms Barton said setting a budget was a good idea.

“Having a good understanding of how much your standard week

costs is a great start – and there might be more expenses than you think,” she said.

“Now is a good time to start considering your own money goals, too. Saving for a car? Gap year? Your budget is the plan to get from where you are now, to where you would like to be.”