University Mistakes #5: Spending Money Instead of Investing It

This 10 Biggest Mistakes You Can Make in University blog series is for any students who are still in school, or about to attend university, so that you can make the best out of your academic career!

Thank you to the dozens of people from around the world who have anonymously shared their biggest regrets in hindsight and what they thought were the biggest mistakes that people make in university. Originally, I wanted to share all 10 at once, but I received so many great responses that I wanted to do a deeper dive on each of the Top 10 mistakes. Check out University Mistake #4 if you haven’t read it yet!

Today, I am going to talk about my own biggest university mistake in hopes that you don’t repeat it!

I wish that I started investing in my financial future earlier.

KAREN NGO

In hindsight, I lacked financial education for several reasons. Neither my parents or friends seemed to know much about this stuff and we never really learned about it in school. I didn’t realize how important personal finance was until the last half of my university career when I started thinking about how I was going to pay off my student loans.

Back then, I saw my student loans as “extra spending money” and maxed out the amount that I took out so that I could spend it after paying tuition. Paying off the student loans were a “future me” problem, and it was fine for me to go out and spend as long as I had “money in the bank”. However, it is 2020 and I am now the “future me” who totally regrets my poor financial strategy (no pun intended).

The first thing I wish I did was to learn more about personal finance and the power of compound interest, which would have motivated me to start saving and investing earlier. The second thing I wish I did was to start paying off my student loans when I started my internship. Instead, I went out more and spent even more money, which was reckless. The third thing I wish I did was to start investing earlier on. Rather than spending the “extra money” on useless things, I could have put it into an investment vehicle that would have generated returns that I could then use to pay off my student loans. For example, I had a Tax Free Savings Account (TFSA), but I didn’t realize that you had to do something with the money in there like investing in Guaranteed Investment Certificates (GICs) or Exchange Traded Funds (ETFs).

Anybody can do anything with enough time and money.  

Mark Reuss

What Can You Do?

Start learning about personal finance as soon as possible. Although it’s unfortunate that we don’t really learn this stuff in school, we can teach ourselves using the many great resources online! You can read my blog post below to get started and check out the resources and details on Wealthsimple, Questrade, or EQ Bank (which I now use for my personal finances). Check if your school offers any personal finance classes, clubs, or communities that can teach you more about wealth and investments.

Get a credit card with no annual fees and start building up your credit score, which will be helpful for when you want to purchase a car or home in the future. Although a full credit check can cost money, you can use Credit Karma or Borrowell to check your credit score for free (your online banking account may also offer this service) and read up on tips and resources on how to improve it.

Think before maxing out your student loans, especially if you don’t need to. Financial irresponsibility happens when you think you have money, but it isn’t really yours. Before taking out any loans that aren’t intended for your education, remember that you will eventually need to pay it back with interest. You can use a Loan Estimator to determine how long it would take you to pay off your student loans and interests once you’ve graduated.

The least you need to know

1. Start learning about personal finance; the earlier the better. Enrol in a class if it there is one, talk to mentors and advisors, and do your research.
2. Practice good financial habits. Build up your credit score and start saving money each month (and investing once you’re comfortable with the risks that come with it).
3. Avoid spending money that you don’t have and think carefully about your student loans and how you will pay it off. 

Stay tuned for University Mistake #6 and remember to subscribe for my top 3 career resources each month!