Money Talks: Four student money management tips from an expert
Centennial College supports financial responsibility, and is always looking for ways to make sure students know how to take care of their money. Jacqueline Correia is a Centennial College alumni who became a financial advisor for Sun Life Financial. During reading week, she gave back by participating in a special workshop called “Manage your Money,” where she taught students tips on how to do just that. Missed out on the workshop? Here’s some of the highlights on how to manage your money and become financially independent.
An important note: You don’t have to have a lot of money to do any of this. There’s nothing wrong with starting small, so long as you start.
1. Be proactive, not reactive
According to Jacqueline, too many people’s finances are entirely controlled by outside factors like jobs or financial burdens. The easiest way to take control yourself? Start putting money away, or as she puts it, “pay yourself first.” In fact, she gives specific numbers on how to do this: Every time you get paid, put 20 per cent away somewhere as emergency cash, and live off the remaining 80 per cent. That 20 per cent is both for investment and things you can’t control, so when an issue comes up, you can deal with it and move on. Jacqueline had a two-year bout of unemployment, and credits saving that 20 per cent with giving her enough extra money to stay afloat. To save that money, you need to…
2. Have multiple bank accounts
Don’t just put all your cash in one big pile, and just sit on it. Even if it’s just a little bit of money, spread it around. Jacqueline recommends one account to serve as an emergency fund for debts you can’t control, like small children, mortgages, funerals, health and disability insurance, and just plain running out of money. She then recommends another one for fun spending, like vacations or big purchases like a good TV.
3. Invest your money
Of course, there’s other ways to grow your money. In fact, one of the best ways is to make some sort of investment with a high interest rate. Even if it’s just a little bit, you can invest your money in a RRSP, a Mutual Fund, or a GIC. It’s more complicated than can fit here, since you have so many options, but it’s worth looking into.
4. Avoid the credit trap
“Credit trap” is a term invented by Jacqueline to describe how a credit card can get out of control fast. Avoiding it is simple, though. It comes down to this: Never pay the minimum balance. Always pay the full amount. Why? You want to avoid something called “compound interest.” Basically, if you don’t pay it all off, then the amount you owe grows. During her presentation, Jacqueline did some math to show that a $500 credit card bill can increase to over $7,000 dollars over 25 years. Bottom line: Pay it off as quickly as possible. There’s another benefit, too, in that it will get your credit score up, too, which is essential if you want to buy a house, car, or other big-ticket life item.
By Anthony Geremia