5 money tips for school leavers.
Are you a school leaver with money goals? Want help to set yourself up for financial independence? These 5 tips can help you to manage your money during this exciting next stage.
You’ve finished school and are about to start a new journey. For some, that might mean going to university or other further education, for others it might be starting a new job. Some may continue to live at home, for others it may mean moving out of home. Whatever choice you make, now is a really important time to develop some good money habits.
Here are some handy tips to think about as you embark on your next adventure:
- Open a bank account that’s right for you.
If you haven’t already, it’s a good idea to open a bank account to help manage and keep your money safe. The 2 main types of accounts are transaction and savings accounts. Transaction accounts are designed for day-to-day spending. Savings accounts are a way of putting money aside for a later time. Bank accounts can be set up by visiting a bank branch, credit union or in many cases online.
To open a bank account the financial institution will need some identification information and documents. The Westpac Identification Checklist for Individual Customers will help you understand what may be required.
If you’re studying, ask your financial institution for information about bank accounts designed specifically for students.
- Set up an emergency fund
Sometimes things don’t go to plan – the car breaks down, your flatmate moves out, you have unexpected time away from work, or lose your mobile phone. All of these could cause a significant strain on money. One way to help minimise the impact these situations will have on our budget is to set up an emergency fund. This emergency money or savings plan is a buffer. A stash of cash for when things aren’t flash. Little things do add up, so no better time to start an emergency fund than today! Did you know that with compound interest and time, if from the age of 18 you put just $7 away each and every day towards saving you should be a millionaire by the age of 60 (assuming 9% p.a investment return using the Vanguard Index Chart 2021 detailing average long term investment returns) (Calculator source: Money Smart Savings Goals calculator). And remember to top up your emergency fund after it has been used.
- What are your money goals?
Where do you see yourself in 6 months, 12 months, 5 years and even 10 years from now? What do you want to have achieved? Some may wish to do further study, buy a car or a house, start a share portfolio, some may want to live and work overseas or just to be able to buy the everyday things they want or need when they want or need and live comfortably. When building out your money goals consider the following:
- What are the goal(s)? Write them down – the more detail the better.
- Visualise - Find some pictures, take photos, or draw what the goal looks like. Put the images in places where you will often see them to remind you why you are saving.
- When do you want to achieve this by? How long do you have?
- Share the goal(s) with others so they can support you.
Once the goal(s) is set, build a savings plan. How much do you need to put away every week/fortnight/month to make the goal a reality?
- Do you have a money plan (Budget)?
Now that you have an idea of what your money goals are, building a money plan or budget can help to keep you on track and highlight any improvements you might want to make. Starting with the amount of money you have coming in, you then subtract all of your expenses to leave you with the amount of money left over for the period. Check out Davidson Institute’s budget planner for a step by step guide to get you started or the Spend Snapshot online tool . You may also find a Money Diary helpful in understanding your expenses. Remember to include your savings in your budget too.
- Money decisions made today can affect the future – What is your credit score?
Each time you apply for credit (whether it’s a credit card, a phone payment plan, or a loan), a record is kept and is provided to the credit agencies by the organisation you applied to. These records detail your entire repayment history, as well as any instances where you fail to repay a loan. This information forms your credit history. Your credit score is a number derived from your credit history. In general, the higher the score the more favourably a lender will is likely to view a credit application. Check out these 3 credit reporting agencies where you can obtain a free credit report every 3 months.
It’s a good idea to regularly check your credit report to maintain its accuracy. If something needs to be fixed, read our article How to fix your credit rating for free.
Don’t think one day or someday. When it comes to your money, start today using these handy hints and the free resources available on the Davidson Institute website to build your financial confidence.
Content current as at February 2022.
This information is general in nature and has been prepared without taking your objectives, needs and overall financial situation into account. For this reason, you should consider the appropriateness for the information to your own circumstances and, if necessary, seek appropriate professional advice. © Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.