Life / Money

3 steps to financial adulthood for students

Managing tight budgets is crucial for students, writes Lesley-Anne Scorgie.

Knowing the difference between good debt and bad debt is key for students, writes Lesley-Anne Scorgie. Credit cards should be your last resort.

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Knowing the difference between good debt and bad debt is key for students, writes Lesley-Anne Scorgie. Credit cards should be your last resort.

Your student budget is beyond tight; books, tuition, lab fees, residence, food, cellphone, internet, beer, parties and travel. But, if you don’t want to live on your parents’ couch when you graduate, you’re going to have to grow up financially.

Use your smart phone to budget

You’re digitally savvy, right? Take advantage of budgeting apps like Mint and YNAB (You Need a Budget). These apps are free, they’re easy to use and, wow, do they ever bring awareness of just how much you’re spending.

You can set up budget notifications so that you’ll get pinged when you’re close to reaching the maximum limit that you set for things like groceries or entertainment.

The key with budgeting is to know your financial limits and stay within those. In other words, spend less than you make and you won’t have to carry a balance on your credit card.

Keep receipts

Paper and digital receipts are worth money when filing your income taxes. That’s because receipts are the proof you’ll need to show the government you qualify for various student tax credits or benefits; and that means more money for you! Sadly, the government won’t trust your words alone.

So, stay organized by keeping receipts for any donations, tuition fees, medical expenses or receipts related to a side hustle (that’s when you earn money from a part-time job).

Use good debt and avoid bad debt

Recent statistics from Ipsos & Knowledge First Financial indicated that most parents aren’t prepared to pay the full cost of post-secondary education through RESP savings. If this is your situation, you’ll be turning to debt and could be RE-turning to live at home once you’re finished university.

Credit card balances are the absolute worst form of debt you can use to finance your living and education costs and that’s because the interest rates are upwards of 19%. So, credit cards should be your last resort.

Low-rate student lines of credit along with federal and provincial student loans are a much better option. They’ve got lower rates and flexible repayment plans. In fact, you’ll even have a grace period to start repaying these loans after graduation. Therefore, these tools are a better option when borrowing.

Remember, debt for school is OK because it’s an investment in your career. But, financing fun, rather than your actual education costs, is a bad financial move that financially savvy 20-somethings wouldn’t recommend.

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