Oran Hall | Money and investment guide for a young university student
QUESTION: I'm almost 19 and a soon-to-be university student from Jamaica who'll start studying abroad in the coming months. I came across your article "Investment Options for a Young University Student". It was very informative. I wanted to know if you have any information or guidelines on how someone my age can begin smartly earning, managing and using their money. Also, if there are any ways apart from savings instruments, as mentioned in the article, that I could invest my money in for profit. I hope to make my money work positively for me.
FINANCIAL ADVISER: Let me begin at the end. The column to which you refer proposed treasury bills and repurchase agreements and also mentioned the lower-yielding savings instruments offered by the banking sector as sources of income to meet recurrent expenses. For growth, I mentioned equities and unit trusts.
Students are in the pre-career phase of the life cycle. This is the foundation stage and one of its primary objectives is tight cash management. In responding to you, I believe it would be useful to focus on the value of financial planning to students and on managing and using money. Success in doing so is critical to generating funds for investment.
Financial planning is important to university students for the following reasons. University is the first chance for significant independent financial decision-making for many, and learning sound financial skills builds a foundation for lifelong financial well-being.
But there are dangers, some obvious, others not so obvious, that university students face. I will mention some of them drawn from the experiences of three groups of university students - one local, two from the United States.
A few years ago, I did an informal survey of a group of students of one of our universities to get an understanding of their concerns, financial challenges and financial management practices. The students had three major concerns: lack of funds for educational and living expenses, dependence on parents and late remittances from parents. They were particularly concerned about poor nutrition at examination time.
Some reported that they used their money carefully, but others reported engaging in poor financial management practices. These included limited focus on savings, little comparison shopping, limited budgeting, spending on parties and limited focus on long-term planning,
A study conducted among students from the University of Georgia and Louisiana State University in 2004 and 2005 on "College Students and Financial Literacy" to examine students' overall financial management practices found parents were the greatest influencers of the decision-making of students and that there were marked differences between financially fit, or not-at-risk, students and at-risk students.
It found that financially fit students practised careful tracking and budgeting of expenses, intentionally avoided impulse shopping, respected money, that is, they saw understanding its value as being important, discriminated between needs and wants, and saved - a habit developed in childhood.
At-risk groups reported the following influences on spending decisions: external factors such as advertisements, the thrill of expensive purchases as status symbols, and the influence of peers, which they associated with impulse shopping: "We mismanage money together".
The findings do not suggest that US university students have better financial management practices than their Jamaican counterparts. When taken together, they illustrate the traits of students who practice good financial management and those who do not. In fact, many of the principles of financial management are universal.
May I propose the following keys of sound financial management? Know yourself, that is, your emotions, priorities and financial position. Have a plan with clear objectives. Control your emotions. Develop the savings habit. Weigh every spending decision, Let your money work. Make a written budget and stick to it. Limit the influence of external elements. Respect money: do not waste it.
Here are some more. Avoid risky undertakings. Understand what you are doing. Be deliberate: do not rush. Educate yourself on financial matters. Protect your health: it is the best way to protect your wealth.
University students have nothing to lose by investing their time to become financially literate. They can use the knowledge and understanding to plan and implement financial decisions thereby making them less stressed financially, better able to perform academically and experience better mental and physical well-being.
As you go abroad to study and as you go through life thereafter, use the points I outlined above to guide you in managing and using your money for they are important keys to financial success regardless of how much you earn.
- Oran A. Hall, principal author of 'The Handbook of Personal Financial Planning,' offers personal financial planning advice and counsel.