Head­ing to univer­sity? It’s time to plan your fi­nances

Central Leader - - OPINION -

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.

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.

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