Money for Students

Read More

Money for Students

The start of the university year sees thousands of eager school leavers leaving the safety and comfort of the family home and beginning their journey towards independent living. For parents and students alike, the dilemma of how to fund academic pursuits is not an easy one to resolve. Taking on debt is something that most prudent money managers avoid. There are, however, two categories of debt; ‘good debt’ and ‘bad debt’. The question is, in which category do student loans belong?

Putting it simply, bad debt is debt which is usually incurred to buy things that do not produce an investment return such as cars and holidays. Good debt is money which is borrowed to buy assets which produce a return such as an investment property or a business. Whether student debt is good or bad depends on how the money is used. Study is an investment that provides a future return. The best return will be gained from a qualification that will lead to higher levels of future income. The lowest return will be gained from qualifications with poor employment prospects or from having a great time partying but failing to get a qualification at all.

Student loans are repaid by way of an additional deduction from income once the student starts working. In effect, a student loan is simply an obligation to pay a higher rate of tax for a period of time and in that way is different from a personal loan.

What should parents do? Leave your money in the bank for as long as your child’s loan is interest free. Encourage your children to live as frugally as possible to keep borrowing to a minimum and to take courses of study that will lead to better income prospects. That way, only good debt will be incurred.

Related Articles

Economy
Liz Koh

Budget Winners and Losers

The latest Government budget had something for everyone but while most households will be a few dollars a week better off, there are some clear winners and losers. In the winners’ corner are businesses, those on high incomes, and savers. The biggest losers are property investors who have built large portfolios financed partly by tax rebates.

Read More »

Top Up or Miss Out

The end of June is an important date for KiwiSaver members. The financial year for KiwiSaver runs from 1 July 2009 to 30 June 2010 and if you have contributed at least $1,040 to KiwiSaver during that time, you will be eligible for the full amount of Government tax credit to be paid into your KiwiSaver account in July.

Read More »

Responsible Investing

There is a worldwide trend for investors to want to make a positive contribution to the world by investing in companies that are socially and environmentally responsible. If you are passionate about the effects of climate change, the scarcity of food and water, and social or environmental policies in general, then you will no doubt wish to ensure that the companies in which you invest are going about their business in a manner that is consistent with your views.

Read More »

Helping You Live your retirement To the Max

Keep in touch

Fill in your details and we’ll get back to you in no time.