I am a Student

How can I best manage my income and expenditure?

It is useful for you to develop the habit of making a budget.
(i) Budgets
A budget refers to a list of income (money you get) and planned expenses (money you hope to spend). Budgets can be made for a person, a family, a business, a government or a country. Each month you may receive a fixed or regular income which means that you have a fair idea of the amount of money you will get.
In your case this may be your pocket change or allowance. In your parent’s case this may be a salary. Your regular income should be used to meet your regular expenses such as groceries and electricity.

You should also set aside money for a regular savings plan from your regular income. Sometimes you receive unexpected forms of income e.g. birthday gifts, Christmas gifts, prizes or rewards for doing well at school. In addition to your regular savings, you should try to save as much of your unexpected income as possible. It is good to save for things we want. Sometimes we may need to make sacrifices to increase our savings and meet our wants or needs.
If you decide to give up the purchase of say one soft drink a day, you can set aside this money towards an item that you wish to purchase. In a personal or family budget, all sources of income e.g. salary, cash, gifts from grandparents, are identified. After this, expenses e.g. expenditure on groceries, utility bills, new school uniform, books, rent, are planned. The idea is to live within ones means or to make ends meet. To do this you must match your income with your expenditure. It is important that you put aside some of your income for savings even before you plan what you are to spend. Our savings is listed as an expense because it is one way we use our income.

How do I protect myself from unforeseen circumstances?
While it is useful to have savings for a rainy day there are some events which may be too costly for even your savings to cover. This is why people use insurance.
(i) Insurance
Insurance is protection against unwelcome/unexpected events. You can take out an insurance policy to protect against damages to your home, your car and even your health. If you do have an accident or become so ill that you need costly medical care, you can make a claim on your policy and the insurance company would pay a given amount depending on what was agreed in your policy. Sometimes you may not need to make a claim and some people feel that they have wasted their money. What you need to remember is that having a policy provides you with the comfort of knowing you have some protection against losses. Imagine trying to rebuild a home that was destroyed by fire on your savings only. An insurance policy provides funding to help meet this need.
Some parents take out insurance policies for their children while they are still quite young. Usually, an insurance policy for a child is cheaper than that of an adult. One useful insurance policy for children is education insurance. It is somewhat like a savings plan and is useful as the child can only have access to the money when he or she enters say university or college, The money placed in the policy therefore grows as the child grows.

What are some other financial decisions I will have to make as an adult ?

(i) Education
Today having a formal education is more important than ever and young people are investing in a good education to secure a good job for themselves. They recognise that there is much competition in the job market and that they must have the right tools to take part in that competition. You cannot win a raffle if you don’t have a ticket. Whether you want to be a banker, teacher, cook or plumber, you should undergo some form of formal training. This costs money. You can meet you education needs using savings, a loan or some type of government grant. Most countries offer student loans at a low rate of interest and the student only begins repaying the loan when he or she starts working.
The government also offers grants to help people further their education. Depending on the national budget, in some years, the government may repay you all of the money you use to fund your education or sometimes only a proportion, say 50%. You must check to see what type of assistance the government is offering to help you further your education and make the most of it.

(ii) Mortgages
One of the most important financial decisions you will have to make is whether to live with family for the rest of your life, rent, build or purchase a home. Renting your own home brings you some independence but you keep paying money for something that will never be your own.
Building or purchasing a home is one of the single biggest expenditures you may make in our life. Most people cannot do so from their own savings. They need to take a loan. These loans are called mortgages.
Mortgages are loans from financial institutions that help people to buy, and eventually to own their own property, whether this is land, an apartment or a house. You might also use a mortgage to pay for improvements to your home. The main difference between a mortgage and most other types of borrowing is that it is ‘secured’ against your home.
Your house is the collateral. This means if you fail to keep up the repayments, the lender can sell your home to recover the money that is owed. But if you do keep up your payments, the house will be completely yours when the mortgage is repaid. You can also take a mortgage loan with another person such as a parent, sibling or partner.
Before a mortgage can be secured you must make a down payment. Since mortgages can be your single biggest expenditure and investment, it is important to start saving for your down payment from early.
Remember, owning a home is a large investment. It is very important to keep your home insured. 

(iii) Pensions
But I’m still at school! I’m young! Why do we need to talk about pensions? It is important to consider who will take care of you when you get older. Some people think that their children or family should do so. Others think they can live on money provided by the government. However, some people make their own pension plans because they recognise the importance of ensuring a good quality of life even in their old age.
A Pension is money or income that is paid out after someone retires from his job. With most pension schemes, you contribute a proportion of your income to the pension fund each month. Some people think of this as a 'locked box' form of savings because you cannot spend any money in the fund until you have reached a minimum age. In Trinidad and Tobago, the government may pay a pension from age 65. Because the government pension may be much less than what you were accustomed to earning, some people begin putting money into a pension fund from the time they start working.
This provides some additional funds in your old age. Pensions can be hard to get to grips with. This is partly because, for many, old age seems a long way off, so setting up a pension may not be seen as a high priority. However, because people are living longer, they can now live for fifteen, twenty or even more years than this after they retire from their jobs. If young people continue to ignore planning for this stage, they may face hardship in their old age.
Some workplaces have a compulsory pension scheme. You can also join a private pension scheme that is offered by insurance companies and other financial institutions. Remember while old age seems a long way off, it is important to start contributing to a pension scheme from young. 

Some Useful Information about Pensions
State pension
A pension provided by the Government. In order to receive the state pension you must pay National Insurance Contributions – which is a form of tax on earnings - payable during your working life. A person must normally pay National Insurance Contributions for a minimum number of payments/ contributions to qualify for a full basic government pension.

Occupational pensions
A pension linked to a job or profession. Many employers offer a pension as part of your job. In most cases you are asked to pay some money (called a ‘contribution’) which is taken from your salary or wage. The employer must also contribute to the scheme. In some cases an occupational pension is called ‘non-contributory’, which means that your employer pays all the contributions.

Personal pension plan
This is a pension an individual can take out with an insurance company, bank, building society or investment organisation. It is suitable for those who do not have access to a work scheme or who do not wish to join their occupational scheme. A personal pension plan can also be used to top-up the pension from an occupational scheme. 

Financial do’s and don’ts

• Use your common sense
If you get into financial difficulties, the worst thing you can do is pretend the problem will go away. It won’t and you can end up in court.

• Trust no one
Especially with your PIN (Personal Identification Number). If someone knows it and he or she gets hold of your card they can collect your money from an ATM machine. They may also tell other people what the number is. If you have to write it down, try to disguise the number and/or keep it in a separate place to your bank / credit card.

• Save something
Build up an emergency fund so you can cope financially in a crisis without being forced to borrow. Saving is also a good discipline regardless of how little you can afford. Don’t be ashamed to start small. Every dollar counts! Get a savings account with a decent rate of interest.

• Get a good deal
Shop around for credit or loans the way you shop for anything else. Look around for the best credit deals. Avoid getting into too much debt!

• Think ahead
You may think pensions are just for old aged people, but the best time to start paying into a pension scheme is around 25, or even earlier. You can have a pension plan from any age.

• Get help
If you’re worried about your finances talk to someone who can help.

• Take action
Personal Finance needs a degree of planning. Use a budget planner. You can also do a lot more to get your money working harder, starting with where you choose to put it.

• Start a committed saving plan today
• Read the fine prints on all your contracts
• The cost of loans can vary according to the type of loan and the lender
• Credit cards are easy to use but it is important to pay off all or as much as you can on a monthly basis. 

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