The sense of freedom that comes with “student life” can lead to some of the most memorable years of your life. However, that freedom also has the potential to be the most damaging period of your financial life. From the very moment you begin your pursuit of financial independence, poor decisions are around every corner – from impractical asset purchases to unsustainable lifestyle choices. If you aren’t careful, bad choices will not only leave you in a world of debt but will also tarnish your credit record, severely limiting your opportunities in the future.
Starting Young
Unfortunately, most of us don’t think twice about the future as young adults. Our plans tend to focus on the present, with broad goals like going to university and getting a job being our primary long-term goals. The issue with these vague motivations is that, when we do have some money, we aren’t equipped to use it wisely. Ideally, we should be starting to save for our future from the day we start earning a salary, with clear goals that rely on sound financial management.
Compound interest is just too powerful to ignore, and the sooner you get started saving the better. Essentially, compound interest is the interest you earn on a monthly loan or deposit. The key is to start investing early, as a small yet consistent amount over time is far more effective than any short-term investment.
Crazy with Those Credit Cards
One thing most under 25’s share in common is that they don’t have a credit card. That precedent appears to be losing relevance, and many banks have begun to realize that students need credit cards that can assist with costly expenses such as international travel, online purchases, and financial emergencies.
Nowadays, Local banks such as Nedbank and Absa offer credit card options designed specifically for young adults. Not only do these credit cards have low service costs, but they also allow you to deposit money directly into the account. In this way, you get all the benefits of a credit card without the drawbacks of abuse.
Unlike normal debit cards, these credit cards allow you to influence your credit report from an early age. A credit report in South Africa is a quick snapshot of your financial life. Banks and other financial institutions use credit report analysis to judge how well you’re able to manage money, and ultimately to decide whether or not you possess the ability to pay back a loan both on time and in full.
Good and bad financial decisions can stay on your record for years. If you want to grow your credit score from a young age, get a head start by learning about which credit options are available to you, and focus on handling your finances as responsibly as possible.
