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Financial education initiative to help manage your finances.
The better educated you are, the better your chances of getting a job. This self-evident truth has been officially confirmed by Statistics SA.
According to their research, the unemployment rate remained high among those with education level of less than matric at 33% while the unemployment rate among graduates remained at 7%.
Clearly, part of the answer to South Africa’s dire youth unemployment figures (more than half of the country’s youth is unemployed) lies in improved levels of education.
John Manyike, Head of Financial Education at Old Mutual, points out the difficult Catch-22 that many young people find themselves in.
“Education may be the only way to break the shackles of poverty in South Africa, but to further your studies you need money. Our 2017 Old Mutual Savings & Investment Monitor showed that the number of parents saving for their children’s education is on the decline, down to 35% in 2017 from 55% in 2010.”
He says a student loan could often be the only choice many young people from disadvantaged backgrounds have if they don’t qualify for a bursary or study allowance. “The result is that many young professionals find themselves burdened with a student loan.”
He urges them to follow a budget and settle the loan before incurring any further debt as soon as they get their first job. “Do this for the sake of your financial health. If you don’t, you could financially hinder your future despite having a promising career.”
Follow these seven steps recommended by Manyike to repay your student loan in time and get you on track to reach your longer term financial goals:
Examine your student loan statement carefully to work out exactly how much you owe and how much you need to pay back each month to settle the debt as soon as possible. Remember the sooner you settle the debt, the less you will need to pay in total interest.
Get to grips with your expenses by drawing up a budget. If you plan ahead, you will know exactly what you can afford and what you can’t or shouldn’t spend your money on. A budget will help you curb any unnecessary spending.
Even though you may have landed a good job with great benefits, control the urge to upgrade your lifestyle. Don’t rush into living it up. Try and live as though you are still on a student budget, until you have settled your student debt.
The longer you take to repay a debt, the more interest it accumulates. This is why it is always a wise idea to pay more than the minimum monthly instalments. Paying back a little extra each month can be difficult, especially if your salary barely covers your basic expenses, but doing this can drastically reduce the total amount of interest owed.
Many businesspeople have had to work multiple jobs to pay off their student loans. Taking on extra work will help you to pay off your debt faster, and add some much-needed funds to the monthly budget.
Getting into more debt while you’re paying off your student loan is never a good idea. The more debt you accumulate, the more you have to pay back each month, making it harder and harder to get out of the debt trap. And it’s called a trap for a reason. If you have a credit card, keep it for emergencies only. Always try and repay the entire amount you owe, so that you don’t collect revolving interest on the outstanding amount. Use store cards with caution. Managed well they will help you build up a good credit profile, but if poorly managed, you could end up deeper in debt AND have a poor credit record.
Speak to an accredited financial adviser who can guide you on drawing up a financial plan and educated yourself financially about getting out of debt. This will help you grow and protect your money.
For more information on Old Mutual’s popular financial education programme, join the digital community on Facebook: On The Money or follow us on Twitter @OM_ONTHEMONEY.