Some of the most important things students learn in college or university aren’t taught in a classroom – especially for those who move away from home for the first time to attend school. Student life is a master class in adulting, with hands-on courses in cooking, housekeeping, time management and of course finances.
Here are some expert tips to help new students manage their money wisely and cut down on stress during a time that can be demanding enough to begin with.
Understand your revenue and expenses
It’s impossible to manage money unless you know what you’re working with. This begins with making a list of all expected income (scholarships, student loans, employment income, family support and so on), as well as the dates it’s likely to become available. Then you list anticipated expenses and see how the two sides of the budget match up.
“My top tip of all is: set a budget,” says Gayle Ramsay, Head of Everyday Banking, Segment & Customer Growth at BMO. “I’d keep it simple. Make sure you set aside funds immediately to pay fixed costs like tuition, textbooks, groceries and internet, and make sure you have some fun funds set aside too. Set up a schedule to make sure you’re tracking everything.”
Ramsay also recommends setting a little money aside for emergencies. If there’s any wiggle room at all after that, even a tiny amount automatically directed into a Tax-Free Savings Account (TFSA) will start to build up a nest egg for the future.
“They should use the tools that are available to track their spending and keep on top of their finances,” says Robin Taub, CPA, CA, author of The Wisest Investment: Teaching Your Kids to Be Responsible, Independent and Money-Smart for Life. “Most of the big banks have tracking and budgeting tools built into their mobile banking; that’s a very efficient way to keep track of your finances.”
Expect the unexpected
In general, it’s good to be a pessimist while budgeting: estimate that revenue will be lower (and arrive later) and that expenses will be higher than you might think.
“There could be additional course fees, activity fees or tutoring,” Taub says. “Your phone or your computer could break, or all of a sudden something’s wrong with the car, or you have to move and you’re locked into a lease.”
It goes without saying that buying groceries and cooking at home are usually thriftier than eating out, and at a dinner with non-student friends, there may be unpleasant surprises if the group decides to split the bill, forcing the student who only ordered a main course to pay for a share of other people’s appetizers, drinks and dessert. Embarrassing as it may be, “you have to discuss it beforehand,” says Taub.
Take advantage of the perks
“The little things can really add up,” says Taub, noting that a daily coffee for $5 is a big splurge when you could simply bring a thermos from home; the same goes for ordering fast food via a delivery app. But “don’t deprive yourself,” she says. “It’s university – you’re supposed to have fun!
She encourages students to do a little research to find out what savings they may qualify for, like reductions on public transit passes. Many live events, museums and restaurants offer significant discounts to full-time students as well.
Keep debt levels manageable
Many students start out their studies with significant debt in the form of a student loan, which will have to be paid back after graduation, so it’s especially important not to add unnecessarily to the debt load during the school years.
Credit card companies offer students easy access to their first credit card, which seems like a free money pipeline until the interest starts to add up.
“Some students are naive about how credit cards work. Spending is frictionless; it’s so easy to tap your phone. It takes a lot of self-discipline to live within your means,” says Taub.
“I encourage parents to sit down with their students before they leave and show them their own statements.”
On the other hand, Ramsay points out, “it’s really good to have a credit card because it helps you build credit, provided you’re paying it off. It becomes part of your budget. Credit cards also have alerts and tracking inside your account, but if you can’t pay it off every month, don’t use it.”
Ask for help
Ramsay says it’s good to check into the budget situation at least twice a month to make sure spending is on track and make adjustments, if necessary.
“Generation Zs believe financial advisors are important, and going to talk to a financial advisor or a banker can actually help you with this stuff. If your family has a financial advisor, talk to them.”