Teach students good money management skills so when they graduate from post-secondary education they won't be drowning in debt.
Going away to college or university doesn't only equal more personal independence for teens, it means more financial independence as well.
And for many teens, they are dealing with finances alone for the first time in their lives, which is why it's important they know how to create a budget and follow it, said Teri Broughton manager, corporate communications for VISA Canada. For many teens, going away for school will be the first time they have a chequing account or credit card.
"When they enter first year they are paying rent, they're buying books, they're spending money on various necessities, yet they haven't learned the basic skills," she said.
In 2007, VISA did a study of 1,000 teens who had just graduated high school to gauge what they knew about budgeting.
"Only one-third of high school students maintained a budget so that means two-thirds of high school kids going into college or university have never maintained a budget," she said.
Broughton said it's important to get teens thinking about money management.
"From teachers who should teach them about basic finance and economics to their parents when they're young, educating them on how to create a budget so they're ready for that transition from high school to college," Broughton said.
This way, the learning curve isn't as steep and the burden of managing finances doesn't overwhelm a student who will already have so many things on his plate.
Basically, students need to learn how to spend their money wisely and learn the difference between what they need and what they want, Broughton said.
"This way they are prepared and won't overspend," she said. "They're able to pay their rent and food, but they're able to have fun as well."
Elena Jara is an education co-ordinator with Credit Canada, a Toronto-based non-profit organization that teaches people proper money and debt management.
"We're here to help and guide and give people the information they need to make the most informed decisions to understand what their financial situation is, what their options are and the consequences when dealing with money," she said.
Jara said their education department is geared toward prevention and in addition to in-house counselling, the organization also goes to different agencies, high schools, colleges and universities to teach seminars on smart money management and budgeting.
One of their more popular seminars, Money 101, is geared toward students and covers many topics including learning about credit, how to apply for it and the importance of budgeting and spending money wisely.
"We also talk about the warning signs of credit problems and how the credit-rate system works, and those are important topics especially if you're thinking about applying for OSAP (Ontario Student Assistance Program) because they'll (the government) deny you if you're more than three months behind any bill," Jara said.
Money 101 also talks about how to budget, breaking it down into categories like tuition, books and all the expenses a student will incur in their first year of college or university.
"It is an eye-opener because at that point kids have never had to pay for school before and they're thinking they're just gong to live on OSAP," Jara said. "Many kids are forced to drop out because they didn't anticipate all the expenses of living on their own."
Jara also said students need to make sure they maintain a good credit rating, otherwise future purchases, such as buying a house or car, may be hindered.
"They have no idea how credit can impact their life when it comes to credit rating..." Jara said. "That's the problem with youth, they're not thinking ahead, that's not their philosophy, when we're talking long-term, their long-term is three to six months."
It's all about making a budget, learning how to follow it and making responsible choices with money so that when students graduate they aren't faced with massive student loans and credit card bills, Broughton said.
"Maybe after you graduate you want to buy a car, or a condo, there's always going to be a next step where you want to be conscientious about your budget and your savings, which will allow you to move on to the next step," Broughton said.
Good money habits now will lay the foundation for how students tackle finances throughout life.
"Encourage kids to be accountable for what they buy and what they hope to buy and how much they earn and hopefully at the end of the day they'll be able to manage their budget and feel confident about the decisions they've made in university and after they graduate," Broughton said.
Visit www.creditcanada.com or www.practicalmoneyskills.ca for budgeting tips and other finance information.
Visit crediteducationweekcanada.com to learn about a free workshop on financial issues Nov. 20 at the Metro Convention Centre.
*Reproduced with permission - insidetoronto.com.
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