Think Much About Money?
by Thomas Leavitt (President & CEO of Northfield Savings Bank) and John Pelletier (Director, Center for Financial Literacy at Champlain College)
Is high school the best time of your life? Some adults think so. That’s probably because when we graduate, many of us leave home to live on our own and start taking on new responsibilities.
One of the first responsibilities you will face is choosing between college, work, military service or technical education. When you make this decision, we advise you to work with your guidance counselor and parents to carefully examine these choices and what they will mean for you and your long term career and income goals.
Ask yourself--how much income will I need to live on my own in Vermont? To find out go to livingwage.mit.edu, click on Vermont and the county where you live.
Now think about jobs that might interest you. Do they require additional education? What salary do they pay? The Bureau of Labor Statistics has data on hundreds of different types of jobs in Vermont, see: www.bls.gov/oes/current/oes_vt.htm.
What you will find is that education pays. Young people who complete four years of college earn, on average, $1 million more in their lifetimes than students with solely a high school degree. In general, any education after high school (including community college & technical education) leads to higher wages and better employment rates.
A college education is a big investment. Nearly two-thirds of Vermont four year college students graduate with average student loans approaching $30,000. Although college is usually a very good investment, you should know that your expected income depends on the field of study and career choices you make. These choices will likely determine how much debt you’ll be able to comfortably handle once working. A large debt load relative to your expected income is a result you want to avoid.
If you have worked in high school, you may be aware that the salary you earn is not what you take home. First you have to pay the government. Other deductions from your pay may include health care insurance and other benefit costs. To see how this works, use the tool at: www.adp.com/tools-and-resources/calculators-and-tools/payroll-calculators/salary-paycheck-calculator.aspx. Your salary needs to be large enough to cover these expenses and still support your lifestyle.
You are going to need a checking account and debit card. Know and minimize the fees that apply to your account. An overdrawn account (paying for things that result in a negative balance in your account) is expensive. Keep ATM fees low by primarily using your bank’s fee-free ATM networks. Understand the electronic banking services available to you. Keep close tabs on your deposits and debits/withdrawals. See if your employer can electronically deposit your pay directly into your account. Choose your bank wisely; they may be your partner later when you need a credit card, auto loan, or home mortgage.
Know how credit scores work. It’s the number financial institutions use to predict how likely you are to pay back a loan on time. A good credit score will reduce the interest paid on credit cards and auto and home loans. A bad credit score will cost you tens of thousands of dollars over your lifetime in additional interest and could even prevent you from getting a loan. One way to get a good credit score is to always pay your bills on time. See: www.myfico.com/crediteducation/whatsinyourscore.aspx.
You have many important decisions ahead of you. Ask for help. Do your research before you make these critical choices. The path you choose will impact you for many years to come. Good luck!