Students must fight temptation to start saving money, experts say
Saving money can be a difficult task for young people.
On top of student loans, tuition fees and car insurance, youth also enjoy spending money on new clothes, partying and eating out.
Mitchell Hyunh, a director at Investor’s Group in Oakville, Ont., said a lot of young people struggle with thinking long-term and that is in part because of the distractions that are out there on the Internet.
“It’s never been so easy to spend your money. Young people see a lot of things on social media… certain things they need to have to look cool and stand out,” he said.
While digital media creates temptation to buy, credit cards make it easy for people to spend money on unnecessary things.
“My friends used to call credit cards free money cards. They would rack it up until it’s full and then just leave it there. I think that’s one common mistake young people make,” Hyunh said.
Hyunh also said students and youth can run into money trouble from overages on their cell phone bills.
David Birkett, a finance professor at the University of Guelph-Humber, said that although the economy is tougher for young people than it was for him, young people should not use the rising cost of living as an excuse for not saving money.
In Ontario, homes costing over $500,000 require at least a 10 per cent down payment, and that might not seem like a lot, but saving enough money for a down payment can be very difficult for busy, social young people.
“When I was in school, I could work a part-time job and make enough money in one summer to pay my tuition for the year. Young people can’t do that now, but you have to deal with the situation,” Birkett said.
Financial sources said there are a few simple ways young people can fix these money mistakes. One way is simply by putting some money on the side for themselves on a regular basis.
They can also set up a savings account with their bank. Most banks have high-interest savings accounts that move money from a chequing account to a savings account automatically.
“Have a cooking competition or watch Netflix instead of going to the movies—or use your Scene points to get the free movies,” Hyunh said.
Laura Plant, representative of student banking at Royal Bank of Canada, (RBC) said students and young people should use their credit cards sparingly—but they should pay off their bills immediately if they make larger purchases.
“If they [students] pay off their bills every month, that stands them in good stead to have a strong credit score, which down the road is really important when they want to make those larger purchases like buying a house,” she said.
For those who live with their parents and have some extra money saved up, it is a good idea to invest it, all sources agreed. There are a lot of resources students and young people can use to learn more about where to invest.
“Make sure you get advice from an expert first. We would want students to come in and speak to a financial advisor so they can understand what is available to them. Because it really is a personal decision,” Plant said.
Hyunh said mutual funds are a great investing option for youth, but it depends on what level of risk they want to take.
He also said young people should have a long-term financial goal. An example of a long-term goal can be anything from paying off the financing on their car to buying their first home by age 25.
As far as owning a home, Hyunh said there are always people out there who can help with the initial down payment.
“Ask your parents for a loan if you have that luxury available. But make sure you pay them back,” he said.
About the Author
Stefan Spiroff Stefan Spiroff is a third year media student at the University of Guelph-Humber. Stefan loves sports, and is a die-hard Toronto Maple Leafs fan. He runs his own sports blog and hopes to work as an editor at a major sports network.
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