Saving takes a backseat as money woes grow

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Saving takes a backseat as money woes grow

A 27-year-old recent graduate surnamed Kim is trying to find a stable job while working part time. She doesn’t come from a wealthy family, so she has accumulated student loans while attending college for four years. Kim currently has a loan balance of 16 million won ($14,560).

“When I crunched the numbers I would have to pay around 450,000 won every month for the next three years [to pay off my debt],” Kim said. “Assuming that the pay in my first year at a company would be around 24 million won, I will be taking home 1.82 million won after tax. It will cost around 1 million won for living expenses, so there won’t be much left to save.”

The problem is that it could take her a long time to secure a permanent job as she currently works part time, limiting the time she can commit to her job hunt.

The difficult financial situation facing recent university graduates was confirmed in a report by Shinhan Bank.

The bank’s big data center studied 20,000 financial consumers between September and November.

It turned out that it took 13 months on average for students that graduated from university to land their first job.

Recent graduates spent an average of 290,000 won a month, excluding living and housing expenses. This money was largely spent on efforts to land a job including further study and books.

The spending by those studying for the public servant exams, which on average takes 20 months, was almost double that of those looking for office jobs.

In fact, those studying for the public servant exam spent an average of 487,000 won a month, nearly 200,000 more.

The majority, or 52 percent, of those seeking regular office jobs spent money on getting various certificates, while 32 percent paid for language exams, 28 percent spent money on job program participation and 26 percent opted for private institution and internet tutorials.

Although the government has been pushing for a so-called blind recruitment system that blocks recruiters from seeing an applicant’s photograph, university and other achievements, it is clear that job seekers are still focusing on bolstering their resumes.

Almost 60 percent of recent graduates said they were getting an allowance from their parents, which averaged 150,000 won per month.

Even if they find a job, their financial situation may take a while to improve.

When Shinhan Bank studied people that have been employed for three years or less, nearly 47 percent had taken out a loan.

On average the balance on their loans amounted to 29.5 million won.

Student loans accounted for the biggest portion, with 21 percent owing financial institution for their tuition, while those that had mortgages and unsecured loans each took up 8 percent respectively.

The study showed that those with debts spent an average of 610,000 won a month on repaying their debt plus interest. It took more than four years on average to pay off the debt.

It also turned out the most ambitious were those that have been employed for two years. In fact, 86 percent wanted to move to another company while those that have worked for a year trailed behind at 83 percent and those that have worked for three years were at 82 percent.

Employees in their second year were looking for an average 7.12 million won added to their annual salary in order to switch jobs. This is a 29 percent increase on the current average annual salary at 24.5 million won.

People that are raising children were heavily burdened by education costs. On average it cost 330,000 won a month per child for private education. For those that are five years or younger, it averaged 120,000 won per month.

The cost goes up to 180,000 won per month for a child aged six and seven, 300,000 won for elementary school students, 410,000 won for middle schoolers and 470,000 won for those attending high school.

There were huge differences by region as well. The monthly education expenses in the three infamous Gangnam districts - Gangnam, Seocho and Songpa - averages 500,000 won. North of the Han River that cost fell to as low as 370,000 won. The difference was more visible for parents of high school students. In Gangnam it cost as much as 860,000 won per month, while to the north it was 540,000 won.

As so many people are busy spending their income on paying off debts and funding children’s education, it turns out not many have the leisure to save and prepare for old age. In fact 26 percent of office workers said they weren’t saving for retirement. Those that regularly saved only accounted for 47 percent, with an average monthly saving of 260,000 won.


BY HAN AE-RAN [lee.hojeong@joongang.co.kr]

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