Money plan for uni
University starts this month and lots of sparky-eyed youngsters will begin the next exciting step in their lives.
It’s an event to be celebrated. It’s also the real start of their financial lives and the moment when the bank starts to take them seriously as real customers, and by real customers I mean borrowers.
That’s because for all but the children of the wealthy, study is a time when young folk go into debt, not only with student loans but also with bank personal loans and credit cards.
As their education and future earning power rises so their net worth gets more and more negative. The aim of the game for students should be to increase the first as much as possible and the second as little as possible.
Everyone is under pressure to spend but students are under some of the worst pressure of all: Pressure to socialise, pressure to look the part, pressure to experience, pressure to live away from home. And yet fulltime study means little, or no, earned income.
At this time in their lives, young people need their parents as financial advisers and guides.
Parents and their offspring should sit down and make a financial study plan.
The Studylink.govt.nz website is helpful in doing this. The aim of the plan – as with any financial plan – should be to set realistic goals and a pathway to achieving them. A key part of that plan is the level of debt that each person can afford to end their study with.
I stress the word ‘‘afford’’. A vet or doctor can afford to have a higher student debt when they begin their career than someone with an arts degree.
The key factors in how big that debt will be are whether a student chooses to live at home or away, their transport choices, their course fees and whether they work while studying.
There are trade-offs to be made all over the place.
Living at home is comfortable and cheap. That means less debt at the start of your working career and an easier life then, including an easier route to saving your first home deposit. But living away is a glorious growth opportunity, even though it’s going to add a couple of hundred dollars a week on to your costs.
Having a part-time job means lower debt at the end and a CV that shows you as capable of doing more than pass exams (employers value both, and will err on the side of giving a job to people with both, rather than one or the other, Student Job Search tells me).
But it does mean less time to study and socialise.
So my advice for all these young students is: Make that plan.
Keep the lines of communication with your parents.
You may get preached at a bit but they have the financial experience you don’t.
Live at home for as long as you can. Your parents are the only source of ‘‘free’’ money you will ever get and by ‘‘free’’ money I also mean freedom from having to spend money on things like electricity and rent.
Aim to get the best value for the debt you take on. Study with discipline, which I tend to think comes from adopting a 40-hour studying week. But do paying work as regularly as you can.
And, I stress, keep your debt as low as humanly possible. Your future self will thank you for that.