Making Cents with Fabio Marrama

Making Cents with Fabio Marrama

Being 20-something can be tough financially, so I sought the advice of Fabio Marrama, social media coordinator for First Ontario Credit Union. 

His blog, Money on Trees- Thoughts on Growing up Financially, gives young people insight into important topics like saving, credit, loans, and more.

What is the difference between a credit union and a bank?

Well, credit unions are similar to traditional banks in the sense that both institutions offer financial products to people. However, credit union members, like bank customers, have access to chequing and savings accounts, loan products, and credit cards. The two big ways they differ though are on profit structure and ownership. A credit union is a cooperative, which means it is owned and operated by its Members, as opposed to being owned by its shareholders like a bank. Members have a voice which is pretty cool.

Credit might be a term a lot of young people really don’t understand. How do you go about earning good credit and how important are credit scores?

I’m no expert, but I can say that good credit is very important. Your credit score has a huge impact on your potential future purchases – like buying a home someday. I went through it buying my first home. Everyone needs to understand credit can either help you or hurt you. Learning early how to manage debt will definitely help with future credit. Some simple rules to follow – pay all your bills on time, limit your number of credit cards, and always protect your identity.

Student debt is a huge, common struggle among graduates. How can one save with so much of their income going to loan payments?

It’s definitely not as easy if you have loan payments dragging you down. However, a little savings every month helps. Make a conscious effort to not touch your savings account and be sure to dump a little money in there every pay cheque. Rule of thumb is pay yourself first. So if you can manage saving 10% per paycheque you’re off to a good start!

How does the outlook on saving differ for people with a steady job versus those still in school or with part time work? How do you prepare for big purchases like a car or home?

The difference is where you put your “income”. If you are still in school and juggling a part-time job, your first priority is paying down any student loan and expenses first and then paying yourself. You always want to reduce your debt load first. Once you secure a full-time job, same principal applies – pay down debt first then pay yourself. If you’re thinking of a large purchase – car or even a home, ensure you have a healthy deposit and can carry the monthly payments.

When is a good time to start an RRSP and what sort of contributions would you recommend for people just entering their field?

From what I hear and read, retirement planning in Canada used to be pretty straightforward, but a lot has changed. Your best bet is to sit down with a qualified financial advisor who can help determine this question for you. They’ll be able to tell you if your wallet can handle the start of an RRSP. We cover a few different scenarios in one of our blogs on RRSPs. One thing I will say, and it’s pretty common sense – start saving while you’re young. One thing you have on your side is time.

What do you think are three important financial topics that everyone should research and become familiar with?

This really differs on your age and stage in life. So far in my life, three topics I researched and became familiar with were mortgages, TFSA’s and credit scores. Firstly, it’s important to start thinking about what it’ll take to own a home someday and what options are out there for you when you decide to apply for a mortgage. Secondly, the TFSA is great. I’ve read many articles with financial advisers stating the benefits of a TFSA. Thirdly, know about your credit score. Learn how to protect it, and how to boost it. Knowing this will come in real handy for the future.

Do you have any advice for young people wanting to start their own business? What are the first steps they should take in terms of getting finances?

Actually our Money On Trees blog has some great information on this topic, I encourage you to check it out Opening a small business can be a lot of work – not something to jump into lightly! There are 3 practical things young aspiring entrepreneurs should know about if they plan on starting a business. First, do the market research. Second, start small and scale up. Third, start networking and get consultation! You never know: you might find new ideas, inspiration and support through useful connections. Sitting with a small business consultant will help to determine ways to get finances and chances are they can pass on some great tips as well.

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