Thousands of young and not so young Kiwis are about to hit financial independence for the first time. They've landed a place in the course of their dreams at university or polytechnic. Many will be at the top of a slippery slope on their way to decades of debt.
Some have been given everything on a plate up until now and expect to continue living that way at university. Others have never had to manage their own money. Or they believe that crippling debt is inevitable.
While students are focusing on finding accommodation, buying their books and learning their way around a new city or educational establishment this month, they should also be learning the basics of money management. There are some financial facts of life that every student should know.
Some students have minimal debt. That's a radical concept. The Guardian newspaper in the UK had an interesting headline recently: "Students now can't even afford to go to a demo".
The reality is there will always be some students who can afford to go to demonstrations, pay their own fees and generally make ends meet. It's not necessarily because their parents are wealthy. They think twice before they spend money and find ways to increase their income. Rather than rack up more and more debt they do simple things such as cycling instead of owning a car or taking public transport, limiting their drinking, working part-time and avoiding hanging out with big spenders.
Work and study can mix. Some readers tell me they don't believe in their children working. Getting a better education is more important, they say. A university graduate who has been fully funded by his or her parents isn't necessarily going to succeed in life. Working while studying is not just the dollars. A reader, Dr Woohoo, posted on nzherald.co.nz how he had helped his student daughter look for work at local bars and restaurants. "Due to her displaying unusual work skills, such as always showing up for her shifts, she now gets as much work as she wants, and will continue to work part time while she gains her qualifications. We've raised our kids with a simple rule. If you pay someone to do nothing, then nothing is the good that will come from it."
Student Stephen Leach has worked 15 to 20 hours a week at McDonald's Ti Rakau branch throughout his university career. The University of Auckland student says working hasn't distracted from his undergraduate and postgraduate studies in physics. Conversely it has improved his time management skills and given him a leg up in the world of work. Although still a student, Leach's hard work has paid off and he has been promoted to manager and given a pay rise. The job has helped him save $5000, which he plans to put towards a car. It has also given him the means to move out of home.
Leach says some of his friends scoffed at him working at McDonald's. "A couple of years later they were asking me to help them get a job," he says. "They needed money, but couldn't [find work]."
McDonald's New Zealand managing director Patrick Wilson started his working life on the shop floor while studying towards a degree. Working in a food establishment usually offers the added benefit of free meals, which shrinks the weekly grocery bill.
Students can and do start their own businesses. It might just be doing odd jobs in the neighbourhood. Or employing a team of your mates to do odd jobs. Victoria University even runs a Business and Investment Club (BIC) for students to help them kick-start businesses.
A classic example is former Westlake Boys High student Jonathan Wrait who launched Virtuoso Tutoring while studying for a BA in psychology. The company employed top senior students from his former school to provide training to younger children. Wrait was the New Zealand winner of the Global Student Entrepreneur Awards (GSEA) in 2011 and won a trip to New York. He has gone on to open other businesses including a creative agency and proof-reading business.
You don't need to live in the style you're accustomed to. There is almost always somewhere cheaper to live. That might be an apartment, student hostel or, God forbid, sharing a room with someone else. Living at home is an option if your parents live locally - although some students would rather eat cockroaches than continue living with Mum and Dad. I have come across students who have live-in positions providing care to elderly and disabled people. It might be that the "employer" needs assistance during the night, or help with tasks such as getting up, making breakfast or going shopping. Few of these options will have the mod cons of home. But you're not a student for your entire life and you'll afford more mod cons in your life if you keep the student debt under control.
Beware of the bank. Banks are kind to students. They offer overdrafts and shower them with credit cards. That's because they want to snare you for life.
Contrary to popular opinion, debtors are more valuable for banks than creditors. The more debt you rack up, the more money the bank makes from you. Many bank staff get bonuses the more they sell to you. What's more, the deal on offer from your bank isn't always the best. Just because you've done school banking or your parents banked with Westpac or BNZ, doesn't mean you have to.
Victims don't get ahead. Don't fall for the victim mentality of some students (and others in life). "It's unfair. I don't have any money. It's all the Government's fault." (Or your parents, or the older generation.) Having a victim mentality often becomes a self-fulfilling prophecy.
The big bad budget. Students come in two distinct species. The majority spend first and think later, but the rarer breed of student spends within a budget. Chances are that some of the money they're spending is from a loan. But it is budgeted for.
Take the analogy of a bucket holding water. The bucket with a tap that is turned on and off in a controlled way is the budgeter and the bucket with holes that empties out is the student without a budget.
The University of Auckland has a budget worksheet for students at auckland.ac.nz/uoa/cs-financial-advice. Sometimes just knowing where your money is going can help you make sensible spending decisions. Maybe that third night a week out drinking would be better spent studying or working. A budget allows you to monitor your spending.
Other people get scholarships. Thousands of scholarships are available to students. Not all of them are aimed at academic super achievers. For example, the Keir Trust Study Award encourages students "facing financial barriers" to undertake studies at AUT. And the Howick RSA provides a $2000 grant to a direct descendant of returned service members to attend a tertiary institution of their own choice. The BreakOut website has more information about grants and scholarships.
Learn about personal finance. The financially uninitiated can learn a lot about personal finance and money-saving techniques by surfing the net or reading good old-fashioned books. There are some finance-is-fun style books. You're Broke Because You Want To Be by Larry Winget and Winning the Money War by Lisa Dudson are good. A Google search also brings up many overseas books with relevance to New Zealand students.