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How to be an adult, one sound financial decision at a time

Many people take a long time to launch on adult life because they've never been taught to spend less than they make.

“The first responsibility of adulthood is paying your own bills,” according to Jamaica Finance Minister Peter Phillips.

That country has worked hard to wean itself of dependency on the International Monetary Fund (IMF) and is in a position to stand on its own feet economically.

Paying your bills is a definition of adulthood that applies to nations and individuals. By that definition, many Canadians remain children into their 20s, 30s and even beyond. Caring parents will point out that given the cost of education, housing and even car insurance, the gig economy and all the low-paying jobs, we can't expect young people to be able to stand on their own feet financially.

A friend of mine uses the wonderful term ‘kidult’ to describe those who are well over the age of majority but still far from being in a position to manage on their own, let alone support a family.

It's a very challenging world, in some ways more so than for previous generations but in other ways easier. After all, these kidults have families able to support them.

One reason so many people take so long to launch on adult life is that they've never been taught how. The one simple rule that leads to financial independence?

Spend less than you make. If your outgo exceeds your income, your upkeep will be your downfall.

How can a young person straight out of high school pay for an education?

The idea of a self-supporting student is so radical that one parent who told his daughter to pay for her own university was actually reported in the media.

But there are ways to do this.

Children who know they'll be expected to pay for their education start earning and saving money in high school. Parents can help with free room and board even if it means the kids have to study close to home. Those who are bright and very hard working can get scholarships.

Alternatively, people who are employed can study part-time and or online. It's not easy but it's doable. I know. I did it.

Those with some work experience and who pay all or part of their way through school know why they're there. They usually choose their courses with more of an eye to the opportunities they lead to and they prioritize getting good grades over partying.

Upon graduation, they will be in a good position to find well-paid work. The fact that they financed their education makes them attractive to employers. And, unlike many fellow graduates, they won't be burdened with heavy debt. If they continue to spend less than they make, they can start saving for a home.

Another expense that weighs heavily on young people is car insurance. Everyone who lacks years of driving experience faces annual insurance costs in the thousands of dollars. Is that fair when for many a car is still a necessity?

Unfortunately, the rule about not being able to spend more than you make ultimately applies to governments and government organizations like the insurance corporation of British Columbia (ICBC). ICBC is in trouble because previous governments tried to keep voters happy by charging them less for car insurance than was needed to pay all the claims.

With their outgo exceeding their income, ICBC found itself deeply in debt and with no choice but to raise rates.

Why pick on new drivers who often have low incomes?

A friend had the misfortune to run into a bear on the highway. Her car was a writeoff. When she went to the lot where such vehicles are stored, she noted that just about every car there had either an L (learner) or an N (new driver) on it.

Not all new drivers have accidents but many of the accidents are caused by new drivers. Would it be fair to ask those who have had decades of accident-free driving to pay?

Someone who absolutely has to have a car to work may have to break the rules and borrow to cover the insurance. Before they do, they should have worked out a plan to pay back this debt.

Hopefully, teachers and parents start instilling in children the value of being financially independent and how to accomplish it.

Troy Media columnist Roslyn Kunin is a consulting economist and speaker.

© Troy Media


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