How much money have you spent today? Bet you don’t know. Coffee, lunch, cute earrings picked up in the University Centre courtyard – it all adds up. November is Financial Literacy Month in Canada, bet you didn’t know that either.
The goal of Financial Literacy Month, as stated by the Financial Consumer Agency of Canada, is “to raise the profile of the importance of financial literacy in today’s world; to show Canadians the benefits of financial literacy in their daily lives and the real dangers they face without it.”
Money, arguably, is complicated and private. People share more about their sex lives than their money woes. My parents’ generation would say it’s impolite to discuss money, but what they mean is it’s impolite to ask about someone’s annual income; it’s not rude to ask for advice on how to save for a laptop or a reading week vacation.
The biggest debt young people are facing is student loan debt, in part because it’s easy to ignore until you graduate and the bank comes knocking with a payment plan that will make even those with strong stomachs want to heave. For each September that your bank account swells with money from OSAP loans, add another year to the time it takes to pay off those same loans. Hindsight is 20-20; trust me on this. I didn’t know how much my monthly OSAP repayment would be. I know now – the cost of a monthly car payment. Ergo, I didn’t own one until I paid off my undergrad loan years later. I won’t disclose how many years that took – see, it’s private.
Consider this: If you graduate with $27,000 (the average amount according to Canada Student Loans) in student loan debt and plan to pay it off in five years, at an interest rate of 3.5 per cent, the monthly amount you will be required to pay is $528. Want to pay it off in four years? It will cost you $642 per month. On top of that, you will need money for living expenses such as rent, groceries, cell phone bills, transportation and entertainment. Unless you want to live with your parents until you are 30, educate yourself now on money matters. Here are five suggestions to get you started:
1. Get a part-time job; you can’t save money if you aren’t earning any.
2. Open a tax-free savings account and contribute a monthly amount via automatic pre-authorized payments. TFSAs were launched in 2009 as a vehicle for Canadians to build up emergency funds and, unlike an RRSP, it’s not taxable when withdrawn.
3. If you have a credit card, use it carefully and responsibly. You must pay the balance owed in full every month or you will pay 19 per cent interest on the balance. Carrying a balance constantly will not only cost you in interest charges, it will also harm your future credit rating.
4. Pay with cash – you can’t spend money you don’t have. Also, you won’t be shocked by all the charges you have racked up on your credit card.
5. Consider your purchases. Do you really need another pair of boots or jeans, or is this just a want?