Financial education 101
As summer gives way to fall, it’s not just the cooler weather making post-secondary students and their parents feel a chill. It’s also the prospect of tuition fees, book costs and other education expenses.
It’s never been more expensive to attend university or college. Statistics show average undergraduate tuition fees in Canada are steadily rising, climbing from $4,400 in 2006/2007 to over $5,000 in 2010/2011. Students enrolled in disciplines such as law, medicine or dentistry will be paying even more per year.
With costs like this, every dollar saved helps. For students entering or heading back to university this fall, here is some simple financial help on how to keep up with all those back-to-school bills.
1. Curb your spending with a budget
Create a realistic budget and stick to it. Look for opportunities to reduce spending by focusing on needs, not wants. Be honest with yourself about what you can afford to spend, and how much you can trim/save – a budget is only useful when you’re able to follow it.
When developing your budget, think about how you might save by making lifestyle changes in areas like entertainment, transportation or meals. For example, with vending machines and fast food restaurants on nearly every campus, buying meals every day can really add up. Take a few minutes in the morning to plan and pack your meals and you’ll find yourself saving more than you think.
In addition, reduce your banking fees. For students who don’t need all the bells and whistles that come with some account packages, I recommend a low-fee or no-fee chequing account, like Coast Capital’s Free Chequing, Free Debit and More account.
2. Be book smart
Depending on the program, books and supplies can cost almost as much as tuition itself. Buying used books or purchasing textbooks online can help keep these costs down. Also, check to see if your school has a buy-back program. Sell your gently used textbooks back to the school book store and put the money towards next semester’s reading list.
3. Manage your student loan wisely
Ideally, you have RESP funds to draw on for your tuition fees (if so, thank your parents!). However, that may not be the case for many students, which means you’ll need a student loan. While going into debt isn’t ideal, remember that not all debt is created equal. Student loans are different from other types of debt as they don’t begin to accrue interest until you’ve finished your schooling. Also, the government offers small grants to those who qualify. Ultimately, incurring debt to finance your education is usually well worth it – on average, people with a university degree have an exponentially higher earning potential. The key is to manage your budget carefully to minimize the amount of debt you’re carrying at graduation.
4. Be credit savvy
Credit cards are a great way to start building credit for the future, but they can be risky if you don’t watch your spending. You don’t want to graduate with a degree in one hand and a large credit card bill in the other. If you must charge expenses to your credit card, get into the habit of never spending more than you can pay off each month. Paying off the bill in full means you can avoid interest charges and debt accumulation. Student credit cards are a good option as they often have a relatively low interest rate and even lower credit limit.
5. Pay yourself first by saving
Saving money may be the last thing on your mind as a student, but I highly recommend it, even if it’s just a small amount. Saving can be a challenge when you’re a student, but if you’re working while attending school, putting some money aside each paycheque is important. This can help you meet future or unexpected needs and also help establish savings as a lifetime discipline. Set up a transfer so that a portion of each paycheque is put into your savings account automatically. This way you don’t have to remember each pay day, and the savings plan becomes a natural part of your budget.
My final note is to parents with children yet to enter university. Setting up a RESP is the single most important step you can take to prepare for post-secondary education expenses. It can take a big load off tuition costs down the road and a little can add up to a lot, thanks to the Canada Education Savings Grant of up to $500 annually. Talk to your financial institution today about how to get started!
Kathy McGarrigle is Chief Operating Officer at Coast Capital Savings.