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Millennials should move home to get ahead, says financial expert

October 19th, 2015 | No Comments | Posted in Education, Student Loan Debt

Christine Romans, Chief Business Correspondent for CNN and author of the new book Smart Is the New Rich: Money Guide for Millennials, is saying that the best economic move cash-strapped young people can make is to move back home with their parents. She disputes the stigma surrounding this decision as a “failure to launch,” disagreeing with financial commentator Kevin O’Leary’s assertion that moving home deprives young adults of the “chance to realize [their] potential.” According to StatCan, 25.2% of young adults aged 25 to 29 were living at home in 2011, more than twice the proportion from 30 years earlier. She cautions, however, that the decision to move home needs to be part of a long-term plan to realize concrete financial goals.

Millennials have gotten a bad rap for their habit of moving in with their parents after post-secondary school. There’s even a disparaging term for the phenomenon — ”failure to launch syndrome.”

But some financial experts say we’ve got it all wrong. In an era of sky-high tuition and soaring housing costs, they argue the group known as Generation Screwed can help unscrew themselves by moving home to pay off debt.

“For these graduates, the biggest financial advantage they have is living at home and taking the rent part off of the table,” argues Christine Romans, chief business correspondent for CNN in New York.

In her new book, Smart Is the New Rich: Money Guide for Millennials, she advises cash-strapped young people that retreating home is the best economic move they can make.

A shameful move?

The vote of confidence would have helped Katelynn Langer when she moved home in October to pay off her student debt and get her life in order. At the time, the 25-year-old worried that other people would judge her. So she referred to her mother as her “roommate” in conversations.

“I always tried to tiptoe around the fact that I lived back at home with my mom,” says Langer, who shares an apartment in New Hamburg, Ont., with her 50-year-old mother, Marjorie.

Langer was embarrassed because of the bad press surrounding the boomerang generation. According to Statistics Canada’s 2011 census, 25.2 per cent of young adults between the ages of 25 and 29 were living at home, more than twice the percentage in 1981.

In a recent blog, financial commentator and TV personality Kevin O’Leary told young adults, “Bunking in with your folks when the going gets tough deprives you of the chance to realize your potential.”

Just weeks ago, a commentary in the Chicago Tribune informed millennials that living at home was hurting the economy, because it cut down on their spending.

Moving home to get ahead

It’s all nonsense, according to Romans. “If they move out, they don’t have the money to move the economy forward anyway,” she argues.

In her new book, Smart is the New Rich: Money Guide for Millennials, CNN’s Christine Romans says moving home is the smartest financial move many young people can make.

She contends it’s better for the economy and for debt-plagued millennials if they move home and save up. She says, typically, new grads don’t have the cash to invest and are working low-paying jobs because they haven’t launched their careers yet. So, “the only lever they have is the housing lever. It’s the only thing they really have to move forward.”

Langer believes moving home has definitely helped her move forward.

She lived on her own for a year after getting two diplomas, in recreation and leisure and drug and alcohol addiction counselling. Even though she was working two waitressing jobs, she found she could barely make a dent in her approximately $28,000 in student loans.

Despondent about her future and looming debt, she moved in with her mother.

“[My loan] was too big not to make the decision to move back home,” says Langer. She continued working two jobs and, without the burden of big rent bills, managed to cut down her debt by $8,500.

Speaking from experience

Langer’s positive experience has led her to stop feeling ashamed about her living situation. “Now, I just kind of own it. It’s helped me, it’s helped my happiness and I feel like I was able from October to now make a huge dent in my student loan.”

Financial writer Krystal Yee in Vancouver is also a fan of exercising the home advantage. “That sacrifice to move home and kind of swallow your pride is worth it,” she says.

The 32-year-old is speaking from experience. After finishing her studies at age 24, she found herself saddled with just over $20,000 in student loans and other debt.

“I was really scared,” she says. “I thought, how could I start my life as an adult if I’ve got all this debt hanging over me?”

So Yee stayed home with her folks for a year after school and worked doggedly to become debt-free. “For me, it worked out perfectly,” she says.

Let’s make a deal

But she cautions that the move home must involve careful planning. She says young people have to recognize that this is a temporary living arrangement where they need to meet concrete financial goals.

“You’re not there to mooch off your parents. You’re there to become a better adult, get yourself on your feet.”

Romans recommends two years at home. She advises millennials to sign a two-year contract with their parents that includes a mutual one-year out if anyone isn’t keeping up his or her end of the deal.

Of course, there’s another party involved in that deal — the parents. O’Leary told millennials in his commentary that moving back home is “crippling your parents financially.”

Yee says that problem is easily solved by contributing to household expenses. While she isn’t charged market value, Langer pays her mother $200 in rent and helps with household bills.

So her mother Marjorie says her daughter is actually a financial help rather than a strain. “Being able to share food expenses and household [costs] is great,” she says.

The only problem with Langer’s living situation may be that both she and her mother are so content with it. Langer admits she has no exit strategy yet. But she promises it will happen soon, perhaps when more than one-third of her student loan is paid off.

“I’ve moved back home to get my financial state in order and I think the taste of freedom is too fresh not to have the aspiration to move out again,” she says.

By Sophia Harris, CBC News
Posted: Aug 11, 2015

US News and World Report encourages enrolment in Canadian universities

October 16th, 2015 | No Comments | Posted in Canada, Education, Student Loan Debt

Obtaining a bachelor’s degree in Canada has the potential to offer a world-class education at a fraction of the price one might find in the US, UK, or Australia, says US News and World Report. According to the Canadian Bureau for International Education (CBIE), 336,400 international students came to study in Canada in 2014 compared to 184,150 in 2008. US News and World Report adds that students planning to study outside the US should give strong consideration to Canada because of its affordable tuition rates and high-quality universities, quoting one student who celebrated receiving her Canadian education “without having to sell [her] kidneys to pay the tuition.”

nternational students in Canada can work during their studies and can apply to stay for several years after graduating.

Annual Giving- Student on Campus

About 336,000 international students came to Canada in 2014, up from 184,150 in 2008, according to the Canadian Bureau for International Education.

Canada isn’t only known for moose, mounted police and maple syrup.

Among a growing number of international students, it’s also known for its world-class higher education system.

About 336,400 international students came to Canada in 2014, up from 184,150 in 2008, according to the Canadian Bureau for International Education. The country is the seventh most popular destination for international students, drawing about 60 percent of its overseas students from China, India, Korea, Saudi Arabia and France.

While Canadian universities do have some similarities to their U.S., U.K. and Australian counterparts, experts say the country’s higher education system is also unique. Here are three facts prospective international students should know about the country’s colleges.

[Check out tips to convince your parents you should study overseas.]

1. They want international students – and lots of them: While international students can encounter hurdles studying in countries like the U.S. and the U.K., that’s not the case for Canada, whose government has made it a priority to welcome international students. In January 2014, the country announced plans to double the number of international students within its borders by 2022.

Once international students arrive in Canada, they may also have a means to support themselves. Through their study permit, students can work part time on or off campus during the school year, and full time during academic breaks. And when undergraduate students graduate, they can apply for a work permit which allows them to stay and work in the country for up to three years.

“The Canadian government has made a very conscious decision to look at international student recruitment as a way of immigration into Canada,” says Britta Baron, who oversees international programs at the University of Alberta. “The fact that students can stay on once they have finished is huge – and it’s not necessarily known around the world.”

2. Canada is influenced by the U.S., but culturally distinct. Want a taste of the U.S., but not a full serving? Canada has “modern, predominately English-speaking cities, with just enough American influence that international students are looking for, but a Canadian multicultural experience that is safe and welcoming,” says Aaron Andersen, director of international recruitment at the University of British Columbia.

That “almost American” experience is a perk for Olivia Baker, a French and British citizen earning a bachelor’s in communications at the University of Montreal.

“It seems very superficial and silly but the whole ‘like in the movies’ aspect is kind of cool,” she said by email. “The red cups at parties, the cheerleaders, the university football team, the throwing hats in the air ceremony, etc., all without having to sell your kidneys to pay the tuition.”

[Find out how to tell if you're ready to earn an undergraduate degree overseas.]

In terms of Canada’s culture, visitors are apt to find friendly, polite people with an appreciation for diversity, experts say.

“As typical, humble Canadians, the students are really a part of the knowledge and the classroom experience and they don’t have that entitlement that can sometimes be in other top universities in the world,” he says.

3. Students can get a good bang for their buck. Although tuition at public Canadian universities varies by province, it tends to be lower than at U.S., U.K. or Australian universities, experts say.

On average, undergraduate tuition for international students ranges from about $20,000 to $24,000 in Canadian dollars (about $15,000 to $18,300) a year, says Jennifer Humphries, vice president of membership, public policy and communications for CBIE. And for those who want to try to whittle the cost down further, there are some, though few, scholarships available, she says.

Al Shaibani, a native of Iraq who graduated from the University of British Columbia in May, says his parents steered him toward Canada because they thought the universities were a great value.

“They wanted me in a world-class university and a research institution,” he says of UBC. “It’s good quality, but it’s also affordable. It’s nowhere near the crazy prices of the U.S., Australia or the U.K.”

[Find out how to calculate the cost of earning an overseas degree.]

While a Canadian higher education might be easier on the budget than colleges in other countries, applicants should weigh a few other factors before submitting an application – or several.

Aside from the province of Ontario, Canada doesn’t use a common application, which means international students will have to apply to schools individually.

Canada also has a slightly shorter academic year than the U.S., with college classes running September through April, experts say. The condensed schedule means a shorter winter break but more time for international students to work over the summer.

Finally, students should think about the weather where they will be studying. While winter can be rough in Canada, the climate really depends on location.

“The eastern parts can be cold, but in the western provinces, the climate is very mild,” UBC’s Andersen says. “It’s not all igloos and icebergs.”

Financial experts weigh in on student debt

October 13th, 2015 | No Comments | Posted in Student Loan Debt

Two financial experts are cautioning new postsecondary students to avoid amassing large amounts of debt that could affect them for years after graduation. Kurt Rosentreter, a financial adviser at Manulife Securities, notes that many students coming out of high school have “very low financial literacy,” which can lead to major financial challenges. Lana Robinson, Executive Director of CIBC Wealth Advisory Services, recommends that students create and stick to weekly and monthly budgets. Both agree that students need to be aware of interest rates and the varying types of debt in order to ensure future financial well-being.

As students prepare to make the leap from high school to college or university, many may find themselves confronting some tough, new lessons outside the classroom.

“Kids coming out of high school have very low financial literacy,” says Kurt Rosentreter, a financial adviser at Manulife Securities. “Very few understand money.”

That can lead to major challenges down the road and exacerbate the debt burdens they will have to shoulder upon graduation, Rosentreter says.

“Coming out of school after four or five years with $100,000 in debt is one of the worst things that could happen to you,” Rosentreter says. “It’s a burden on your back that will limit your ability to get debt for future purposes, like borrowing to buy a home or a car.”

Experts say budgeting and using debt prudently are essential to ensuring students’ future financial well-being.

Budgeting

Lana Robinson, executive director of CIBC Wealth Advisory Services, recommends that students create a monthly and a weekly budget to track their sources of income and their expenditures.

Income sources can include student loans, bursaries, a line of credit, loans from family members and income from part-time or summer jobs.

Expenses can be broken down into two categories, says Robinson. Non-discretionary costs include non-negotiable items like rent, tuition and transportation.

Determining how much to spend on discretionary items requires making decisions, such as how much to shell out for cellphone coverage and whether to eat out or cook at home.

However, it isn’t enough to simply create a budget, says Robinson — for many people, the tricky part is sticking to it.

“It takes discipline,” Robinson says.

For students who receive student loans and other income in large, lump sums, Robinson recommends keeping that money in a separate savings account and transferring portions of it into chequing on a monthly basis. That can help students ensure that they don’t spend more than their monthly allotment.

Managing debt

Learning how to use debt wisely is another important skill for students to grasp, says Rosentreter. It’s all too easy to run into trouble by treating a credit card “like it’s candy,” he says.

“I’ve seen kids who are 25 years old who are declaring bankruptcy because they’ve rammed up credit cards,” Rosentreter says.

There are several kinds of debt that students can use to pay their way through school, and Rosentreter recommends sticking to those with low interest rates that allow more time for repayment.

Government student loans are usually the best option in this regard, as they typically don’t require students to pay them back until after graduation. However, some students may not be able to secure as much funding through that avenue as they require — particularly if their parents are in too high of an income bracket.

A student line of credit from a bank is a good alternative, while credit cards — which have the highest interest rates and need to be paid down quickly — are the worst of the available options, Rosentreter says.

If possible, students should try to borrow money from parents, grandparents or aunts and uncles, as family members are likely to provide loans on friendly terms — for example, not requiring the student to pay back the money until he or she has landed a job.

Of course, students don’t have to wait until graduation to start paying down their debt, Robinson says.

“If you have extra money now, for example if you’re working in the summer and maybe you’ve made a little more than you need, you could look at paying some of it down,” Robinson suggests.

“Reducing the debt is definitely a good strategy if it’s within your means to do it.”

By Alexandra Posadzki, The Canadian Press
Thursday, August 6, 2015