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With the HSC exams finished and new graduates about to begin the next stage of their education, perhaps it’s a good time to start thinking about a new challenge ahead: how your teenager will fund his or her life at university.
Of course, you can always give your childs a helping hand with their finances during this time. But it’s also important to get them ready to stand on their own two feet during and after their studies.
For some parents, this may be a great opportunity to have those crucial chats about money and the financial workings of the world.
Chat #1: How debt and interest work
The first thing to examine is whether your child is eligible for the HECS‑HELP loan scheme. It helps students to pay their contribution amounts, but cannot be used for additional study costs such as accommodation or text books.
Importantly, there’s no real interest charged on HECS‑HELP loans, but the debt is indexed each year to reflect changes in the Consumer Price Index or inflation.
Your child will have to start repaying this loan back after he or she starts earning more than the compulsory repayment threshold. For the 2016‑17 income year, this threshold is $54,869.00.
With this in mind, this may be a great time to get the discussion going with your teen on how tax works and also to investigate if your child meets any of the criteria for tax deductions for some study costs. Usually these deductions only apply to those studying in a field they are already working in, so likely won’t help your teen
Your teen’s TFN will also be needed if she or he gets a job and tax must be paid when your child starts to earn more than $18,200 a year. That’s equivalent to $350 a week, $700 a fortnight and $1,517 a month.
Chat #3: Money doesn’t grow on trees; we have to work for it
Obviously, you don’t want to stress your child out or jeopardise his or her grades, but picking up a few hours of work a week can make a big difference to the bank account and prepare young people for the workforce. It will also look good on their CV and can provide valuable learning experiences.
Earning a living is something we all have to do, but it can also be lots of fun and very rewarding too. Your teen may not have the option of working in their dream role right away, but often our first jobs teach us skills that are desirable for later on in our professional fields, such as customer service or problem solving, so a part time job at uni can help put them on top of the pack when applying for roles in their chosen field down the track.
Chat #4: Budgeting is important
Budgeting is a vital financial skill that could make or break your child’s uni years and financial future.
Budgeting starts with making a list of all known expenses — rent, utilities, public transport and groceries — and all income or savings. Analyse these to understand your teen’s spending habits and what can be cut back. Then allocate money to expenses and stick to set limits on spending.
ASIC’s MoneySmart website provides some tips on living on a tight student budget. It also has a useful and free app called TrackMySpend which will allow your child to record his or her expenses, nominate a spending limit (per week, fortnight, month or year) and track the progress.
Chat #5: Living within your means is important
It’s a good chance to convey the importance of saving and the long term impact it can have. Saving is a very important life skill, one most of us wish we had mastered early on in life. ASIC’s MoneySmart compound interest calculator is a super compelling way to demonstrate to your child the power of time and interest.
There are also many ways your child can save money while studying at university. You may come up with more relevant examples, but some tips include:
Take your own lunch to uni and eat avo on toast at home.
Keep a watchful eye for student discounts and use your student card, offers vary widely from books to bars.
Look for text books in the uni library first. Or, use e-textbooks rent them, orbuy second-hand. You should also sell last term’s books.
Learn smarter shopping habits, such as waiting for sales or supermarket specials, buying online and buying pre-loved goods. Always shop around before committing to a contract.
Spend less on transport by riding a bike or walking more.
Take up wallet friendly past times, it costs nothing to have a game of soccer or volley ball.
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