I’ve always thought that there should be a mandatory personal finance course for high school students. If most 20-something’s parents are much like mine were, then personal finance is treated as more of an adult issue. My parents told me that I was too young to worry about money. So I didn’t. I never asked questions. I never so much as saved a dime. If only I knew in my twenties, what I now know in my thirties…
Why save for retirement? I can barely see myself at 25, let alone sixty.
That was me at 20. Why save, indeed. When I was 20, I spent my money on clothes, CDs, and concerts. Not once did it occur to me that I should put it away for the future. Like most 20-year olds, I lived in the now. But now that I’m older and wiser, I know better.
Tip: The money you invest now is worth more than the money you invest in the future. That is, if you invest $1 when you’re 20, it will be worth 1.75 times more at 30. That same dollar will be worth 3.5 times more at 40, and 7 times more at 50. Doesn’t sound like much until you multiply it by larger numbers. Start saving now and watch your money grow.
I know – when you’re twenty, saving for later is a crazy thought. When I was twenty, I didn’t even have a savings account. I didn’t know about interest, good or bad, until it was building up on my student loan.
Tip: If you don’t know about these things now, I recommend that you do some research on the different savings accounts out there. Open a tax-free savings account and start putting money away. What will probably surprise you most is that you won’t really miss that $50 or $100 every month.
Don’t let debt slip.
When my boyfriend was 20, he made a couple of financial errors. He decided one day that he had had enough of his cellphone company, so he just stopped paying them. Later, he forgot to pay his tax preparers their service fee, but since he had moved and changed his phone number, they couldn’t call to tell him. Finally, he decided that his gym membership was too costly, so he closed his bank account to stop them from taking the money each month. All of these ‘solutions’ were short-term and short-sighted, and at the time he thought he’d gotten away with it – until he went to apply for his first credit card. Let’s just say that the credit card company wasn’t too impressed with his score.
Tip: You can’t run from your debts. Stay on top of payments and do regular credit checks.
The nasty student loan
One tidbit of advice here – don’t take more loan money than you need. I know it’s tempting, but those loans are really, really hard to pay off. When I was in university, I remember thinking, “Once I graduate and get out into the real world, I’ll have a ton of money and I’ll be able to pay all this off easily.” Unfortunately, it doesn’t really work that way.
Tip: Make a budget to find out how much you’ll need for the school term. Don’t accept a penny more then what you actually need, then stick to your budget.
New cars aren’t worth the fuss
As I’m sure you well know, new cars depreciate in value the second you drive them off the lot. On average, it takes 5 more years to pay them off, if not more, and they cost a lot to insure and maintain. When you’re 20, although you might want one, you don’t need a new car. Find something practical; the best kind of car is compact, gas efficient, and in good working order.
Tip: Get a bus pass or buy used.
It’s the spending, not the earning
No matter what you think now, too much stuff doesn’t lead to happiness. It leads to debt. It doesn’t matter how much money you make if you spend it all as soon as you get it.
Tip: If you’re making extra money, put it away for later. You won’t regret it, I promise.
Conundrum: You need credit to get credit.
It’s true; in order to get credit you need credit. Classic chicken and the egg story.
Tip: Get yourself a secured credit card and use it wisely. Only use it if you have the money to pay it off immediately. Don’t miss a payment. After a year, look for a ‘real’ credit card. During the time it took you to earn that credit you should have learned how to properly use it.
Just because you qualify, doesn’t mean you should say yes
After I got my first credit card, the letters started coming in. It seemed like every credit company out there wanted me to have their card. Funny, before that they would have nothing to do with me. I said yes to them all, just because I could. You know where it got me? In debt.
Tip: Don’t accept too many cards and use the ones you have wisely.
The more money you put down on your house, the less you pay in interest
If I’d known this when I was younger I’d be so much better off now. Both of my parents were realtors for years, but I never really paid much attention to what they were talking about. Buying a house just always seemed so far in the future. I never even considered saving for it.
Tip: Start saving early – the more you save now, the less you pay later.
When I look back over these tips, I realize how little I knew back then. It’s a shame, really. So many of us know so little about money. If you or someone you know is in the same boat that I was, do them a favour – share this article with them. Knowledge can be powerful, and in this case, profitable.
Writer for RateSupermarket.ca