Finance school, not having fun: Scorgie
Abide by the 1.5 rule and take on a summer job to curb student debt.
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Being a student is so much fun! Parties, pranks ... and hard work. But, there are some big financial mistakes you can make, including not caring about money.
Having money is awesome during your studenthood because you can afford to have a life. Think spring break in Florida! If you save $150 per month from your part-time job, you’ll have enough for flight, hotel and all the Pina-coladas your heart desires.
And … don’t forget to thank your parents for saving up a whooping stash of cash in your RESP to pay for the big school-related expenses.
But, not every family is prepared for the cost of education. Recent survey results from Ipsos and Knowledge First Financial indicates most parents aren’t fully prepared to give their children a free ride for post-secondary.
And this is where students get their financial knickers in a big twist. They use their student loans, lines of credit and credit cards to finance their fun as well as tuition, books and living expenses.
This means D-E-B-T; and taking on too much of it is financially lethal. It happens slowly by using a credit card and not having the money to pay it back. Or, taking too much credit from government student loans or student lines of credit.
The rule you’ll want to follow is to borrow a maximum of 1.5 times the cost of tuition and books every year.
So, if tuition and books total $5,000 every year, you would borrow a maximum of 1.5 times that or $7,500.
Yes, it can mean you’ll come up short and not have enough money.
Too bad. Get a summer job and save.
That leads to the second biggest financial blunder, which is not working. I get it, you are strapped for time. But, working allows you to strike a social and financial balance.
Between the 1.5 rule and getting a summer job, you could have 50 per cent less student debt when you graduate! Yeah, you might not have to move home with your parents!
Paying back student loans
In November 2016, the federal government took steps to prevent student loans from becoming a burden. Canadians don’t need to repay student loans until they’re earning at least $25,000 per year. For those whose repayment time has come, next tax season they may be eligible to claim an amount for the interest paid, in addition to their tuition credits.
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If you’re dealing with a bank that’s diming you to death on fees, look around for someone else who won’t.
Let others know about your goal — they can help keep you motivated.