A favorite lamentation of the woeful student in any grade upwards of Gr 5 is as follows: “Why do we learn this useless gibberish (insert decrepit math or science unit) when we could be learning about real life? I don’t know how to do my taxes! Where’s the class for that!?”
Truly colorful commentary. Fortunately, there are now many educational outlets that do focus on practical “every-day” learning. Our Financial Literacy for Youth Webinar is a newest addition to the mix! It was run by Dhwani, a high school sophomore interested in medicine and everyday finance.
She's an English and Math tutor and a part of IntegraYouth’s graphic design team. Dhwani herself was once partial to the common struggle of lacking confidence and understanding in finances. But once being called on to shape up her family budget before purchasing a new home, Dhwani discovered a whole new world of money! And like the bulk of all teenagers, after learning something new and useful she felt the urge to spread her knowledge to others.
Keep reading to learn about important financial terms, financial loans, how to budget, and common saving tips.
Important Financial Terms
Take a look at these definitions:
More on Interest:
Interest can be good or bad. As Dhwani said, interest on your savings is your best friend, and large interest rates on your loan are undesirable. If you haven’t done any sort of financial planning before, you should consider getting a youth checking and savings account. On your savings account, you’ll get monthly interest. Mine for example, comes up to around 11 cents monthly, doesn’t that sound nice?? That’s just the very humble beginning, your goal is to hunt for a place where your money can sit pretty and grow with time, like a calm toddler.
*TIP* When looking to open up a bank account, find the institution that will offer you the highest interest rates on your savings account. Canadian Financial Institutions have interest rates that range from 1.50% to 2.30%. Any rate above 2.0% is especially cool.
More on your Credit Score:
This neat little number is your financial resume and character reliability profile in one. Your credit score depends on your financial tendencies, whether you pay your bills and taxes on time, whether you have any ugly outstanding debts. It’s truly in your best interest to be punctual with your monetary deadlines. Getting a mortgage on a house or car you’re looking to purchase, or getting any type of bank loan depends on your credit score; no financial institution wants to take on high-risk clients. Unless that place is the horrifyingly immoral Pay-Day Loan office, and that place sucks, but we’ll get into that later.
*TIP* Keeping your credit score between 760 and 850 is the goal situation to be in.
More on Net Worth:
You’ve definitely got one! It’s not just for Jeff Bezos and other public figures. It’s a big picture way of seeing your financial constraints and how much you can borrow from financial institutions.
Types of Loans:
Take a look at these definitions:
More on OSAP:
At first glance it sounds amazing, who doesn’t want a lower tuition? But keep in mind, OSAP is essentially student debt. It requires that your granted sum of money be paid back immediately after you graduate from post-secondary. And if you can’t pay it back, interest piles up. The safest bet for students is to crank out the scholarships and have as little dependence on loans as possible. Note that scholarships aren’t only for geniuses and Pulitzer Prize-winning essay writers; using scholarship databases you can get started early and apply for many useful opportunities. Just as we stressed in our webinar on cold-emailing (see Weekly Webinar Recap: Cold Emailing and Outreach), don’t be afraid to go for it!
More on lines of credit:
Not to be confused with credit cards, lines of credit are approved for a certain amount of money, to be withdrawn in any increments that suit the customer. It’s a bit different to a normal loan, where you get all of your approved sum up front. Once the borrowed money is repaid, the borrowing cycle can start over without you having to re-apply for another LOC. The interest rates here are lower than with a credit card (with a LOC secured by your worldly assets) and there aren’t any annual fees! LOC are characterized and favoured for their flexibility as Dhwani mentioned, but make sure to send in your minimum payments on time and not go over your spending limit.
More on Payday Loans:
A payday loan is a cash sum of money you can be loaned immediately no matter your credit score and customer risk. BUT, because you're such a big gamble to the payday lenders, your interest rates will cost you an arm and a leg. Where a bank could have 1.5% interest rates on a collateral loan* and 8-9% on an unsecured loan** (depending on the institution), loan sharks set their rates around AT LEAST 15-20%. You have a fixed date to pay back your loaned sum of money in full or else, you’re subjected to the crippling interest rates.
This serially homicidal wolf in sheep's clothing is to be used in very specific instances and in those instances only. Otherwise, the interest rates and debt it foreshadows can lead to a serious money pit. Any financial advisor or person on the street could tell you that loan sharks should be illegal. You can “safely” use this option when you’re in immediate need of cash but have a guarantee that you can make the decided-upon due date. For example, Covid-19 hits and a single mother needs to buy groceries for the next week but her steady paycheck doesn’t come for another 14 days.
*A loan in which the bank may seize assets like your house if you can’t pay up
**A loan without customer assets to protect the bank in case of a default
More on Mortgages:
Mortgages are specific to real-estate loans. It’s the 10-40 year contract you may hear your parents mentioning in familial financial discussions. The interest rates with mortgages aren’t terribly high because the loan collateral is the real estate property you’re paying off; if you’re unable to make your payments and the situation gets bad enough, the bank can seize your property.
More on Credit Cards:
Debit cards make payments with your own money. Your first, middle and last name are metaphorically branded on each dollar if you want to be dramatic about it. But when you use a credit card, you’re taking very quick, informal loans from your bank. At the end of each month you pay the bank back the total amount you’ve spent in credit card purchases. It’s easy to get caught up in the excitement of having the entirety of your credit limit sprawl out before you, because even if you’re dead broke and deceased on your debit card, you can still make purchases on your CC with the bank’s money. But, a golden rule of thumb is to never spend more than you’ve got. Don’t count your eggs before they hatch, don’t start slacking off mid-term, don’t barter off your first born-child to Rumpelstiltskin. Every month you must pay back the total you’ve spent. If you’re behind on your payments your credit score lowers, remember that term from before? And just like with LOC, don’t spend over your predetermined credit limit.
More on Scholarships:
For students looking to accumulate funds for continued education, as was mentioned above with OSAP, the most sensible thing to do is get scholarships. You may argue that it isn’t free money when so much essay writing and application crafting goes into applying for scholarships, but it’s the only scenario in which you don’t have to give any money back. It’s very hard to win a scholarship, but that’s why you apply for loads of them. Invest time in this option, further your chances. Do as you would when buying multiple tickets in a raffle, increase your statistical probability of succeeding!!!
The Art of Budgeting!
When you let your money run wild like free-range poultry, you’re liable to wasting a lot more than you realize. Even if you grow up to be very financially comfortable, like Dhwani’s family, frequent little purchases and forgotten magazine subscriptions can really add up and make you wonder where all your money went. That’s a painful realization to have when it comes time for an important purchase. And if you aren’t too financially comfortable, budgets are all the more important as they allocate your hard-earned money in the spaces it’s most needed.
Budgeting is crucial to keep you in control of your paychecks, and not have your them control you. It’s a financial plan for a defined period of time. At some point, it becomes especially important for youth to start learning how to manage their own money. Dhwani herself acknowledges that there's a whole world of adulthood and finances she knows nothing about. And as someone who wants to move away from home in post secondary, it’s her responsibility to know how to take care of herself.
With the proper template, mastering the art of budgeting is easy and eye-opening. Luckily, Dhwani saves the day with her thorough, colour coded budget template that can suit just about anyone’s organizational needs. Find a copy of it below in the resources section.
There it is! Hopefully you’ve learned and internalized some very important vocabulary from a course like Gr 11 Economics (which is a fantastic social science to take if Dhwani’s webinar topic intrigued you). It’s the course grade 5 you dreamt of. We wish you all the best in your financial future!
Additional Resources:
My Financial Future - Monthly Budget - (Make sure to make a copy of this doc in order to be able to edit)
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