November is Financial Literacy Month, and for university students, it’s generally a given that finances are an uphill battle. Between utility bills, rent, groceries, textbooks, tuition, and every other cost associated with higher education and living on your own, it’s no wonder many students are barely scraping by.
So how can students handle this never-ending list of costs?
The Charlatan spoke to banking experts and students to find out the best ways to budget money and prevent debt, all while saving for school and paying expenses. Here are the keys to student financial success:
1. Save some funds for yourself
“Pay yourself first,” said Kareem Abo El Ella, a personal financial planner at the Royal Bank of Canada (RBC).
Investing in yourself may sound like an unlikely priority when you have a pile of bills to pay, but Abo El Ella said building this habit is an essential aspect of growing savings. By putting money aside every time a payment comes in, he said students will learn the value of building consistent savings.
2. Avoid debt at all costs
“Try to never carry debt on a credit card,” said Ian Lee, a professor with Carleton University’s Sprott School of Business. “And pay off the whole amount every month.”
Students often face high credit card bills that end up growing interest and damaging their credit scores, according to Lee.
He said students should treat their credit card like a chequing account to ensure they are only spending money they have. This way, Lee said students can walk the line of debt without falling into it, and are able to pay off their credit every month.
Lee added that credit cards are useful for students to start building up a credit score, which is important when purchasing real estate down the line.
3. Use only one credit card
“Have one card—Visa or MasterCard—and pay it off every month,” Lee said.
Although retail and grocery stores have their own credit cards, Lee strongly cautioned against their use. He said these cards come with a high interest rate of around 28 per cent that isn’t balanced by the benefits.
“Cut them up, pay them off, and then start saving,” he said. “The best form of saving is eliminating expensive debt.”
4. Learn how to budget
Sierra Gardner-Williams, a second-year international development student at Carleton, said she allocates her money into categories, like entertainment and food, to help keep track of her expenditures. She said it helps her make decisions about how much money she is spending on groceries and eating out on top of the finances required to pay rent and bills.
Gardner-Williams said she uses applications on her phone to help her “live on a budget.” She recommended the following budgeting apps:
Mint – A personal financing application that gives you a big picture of your finances. It can be linked to your bank account, and helps create personalized budgets. (Free for iPhone and Android)
Wally – Helps set and achieve financial goals, while balancing income and expenses. (Free for iPhone and Android)
Receipts (Apple) or Smart Receipts Pro (Android) – Both apps allow you to photograph and file your receipts, instead of carrying around wads of them in your wallet.
Unsplurge – This free app helps individuals save up for something in particular by helping set goals and sending notifications of encouragement and congratulations. (For iPhone only)
Canada Taxes and Tip Calculator – This app helps you calculate purchase totals before you arrive at the checkout by adding applicable taxes, and tells you how much to tip. (For iPhone only)
5. Use your student status for discounts.
The most well-known is probably the Student Price Card, sold for $10 and partnered with more than 120 retailers and service providers for a 10 per cent discount at most businesses.
But there are special student deals in Ottawa too:
Groceries – Every Wednesday at Bulk Barn, students get 10 per cent off their entire purchase, while Tuesdays are the student discount day at most Loblaws, Independent, and Metro grocers. Cedars and Company, a small grocery store on Bank Street in Old Ottawa South, also offers a 10 per cent student discount every day of the week on all items except dairy products.
Entertainment – Yuk Yuks Comedy Club has $7 tickets on Thursdays—a special price for students—and most Ottawa museums have discounts too.
Travel – Greyhound and Via Rail both have student prices to help reduce the cost of heading home for the break.
Health – Many gyms and fitness institutions have student deals, like Pure Yoga’s 40 per cent off deal for weekday packages.
6. Educate yourself
Make an appointment at a bank and go talk to a human. Abo El Ella said personal financial planners are there to help find the best financial resources for every individual. Even if you’re wary of banks, Lee said to keep in mind that Canada has some of the most rigorous financial service regulations in the world.
You an also find a credit union. These are not-for-profit organizations owned and operated by credit union members, but they are far less abundant than banks.
Finally, don’t forget to peruse the internet for tips and tricks, but make sure the information is relevant to Canada. Abo El Ella and Lee said websites like Finance Canada, Canada Revenue Agency, Canadian Deposit and Insurance Corporation, and Office of Financial Literacy for Canadians are great resources.
7. Know where to save your money . . . in a Tax-Free Savings Account (TFSA)
A TFSA essentially allows individuals over the age of 18 to set aside money that does not face income tax deductions, according to the Canada Revenue Agency.
The TFSA has only been around for about four years, but they are strongly supported by financial advisors like Abo El Ella. He said they are flexible, easy to set up, easy to withdraw from, and are ideal for students and people with low, modest or irregular income.
But Abo El Ella said there are a number of different investing strategies that can be associated with a TFSA, and that can be explored to increase returns on savings.
8. Do not go to a Payday Loan office
Payday Loan offices are short-term borrowing bureaus, where people can borrow small amounts of money to help pay bills or pay back credit, according to Lee.
In Ottawa, some examples are MoneyMart, Cash Money, and Cash Shop.
But Lee said to avoid using these services because they will charge you between 50 and 60 per cent in interest rates.
9. Registered Education Savings Plans (RESPs) are highly restrictive
The Canada Revenue Agency website said RESPs help families put aside funds, also known as educational assistance payments, for their child’s education. But the government stops contributing once the beneficiary turns 18-years-old, so this form of saving is only useful when established well in advance of post-secondary attendance.
But Lee said RESPs are designed for the highest earners in the country, so alternative saving options might be best for students from lower income families or for students wanting to start saving for their own families.
He added that the returns from these registered savings plans aren’t as worthwhile as we are led to believe.
“[RESPs] are very restrictive,” Lee said. “You save money to do something with that money one day, and that first priority is often to buy a house or start a business.”
10. Take advantage of resources at Carleton
Financial Literacy Month aims to help Canadians manage debt, build savings, and understand their financial rights and responsibilities, according to Carleton’s Awards and Financial Aid website.
At Carleton, students have the opportunity to attend workshops on repaying government student loans from the National Student Loans Centre, credit from the Credit Counselling Society, and budgeting from the Centre for Student Academic Support.
So, how well are you managing your money this Financial Literacy Month?
