by Tim St Vincent

A question! Yay, I love questions. Below is a question we hear fairly often, the reply is somewhat involved so I will be responding in two parts. Part one is below and is exactly how I put myself through university.

Q: “I’m attending my first year of university and haven’t been able to set aside enough money. My parents are helping by giving me free room and board, but only if I stay in school. I’m going to need to take out a student loan to cover some costs, and will work part-time to help with the money situation. I’m looking for advice to help me get off to a good start and avoid graduating with a mountain of debt. Thanks!”

A: A lot of people run into financial problems during and after university, sometimes they fall prey to credit traps or reach for credit to cover financial shortfalls. Young adults are particularly at risk as credit is very new to them. Post-secondary education is expensive and costs continue to rise in Canada, with the average student graduating with over $26,000 in student loans! When you factor in other forms of debt like credit cards, car loans, and bank loans, the number is easily over $30,000!

Where you go to school, how you manage your costs during school and the money decisions you make have a big impact on how much debt you graduate with. The decisions you make now have long lasting implications, and will impact your credit score when you graduate; and your credit score has far reaching implications beyond simply getting your next credit card. It’s easy to make mistakes and get caught up in the university experience if you don’t have the knowledge and safeguards in place to protect your finances.

This is such a good question that our president, Scott Hannah, had a very similar question asked in his column for The Province (a daily paper in B.C.). To respond to your question, I drew heavily from his article. So, in responding to your question let’s talk about “Seven financial mistakes to avoid at university.”

1. Moving away from Mom & Dad

One of the biggest mistakes post-secondary students make is moving out of the parental home. I understand the need to experience freedom and independence, but the financial cost of such a move is huge. You have made the right choice if you stay at home while in school. By doing so you are avoiding one of the big money mistakes many post-secondary students make. While some specialized programs may require a student to attend university in another city, one can save significant money and graduate with a lot less debt if able to stay at home with some support (free room and board).

2. Borrowing more than you need

Just because you qualify for a certain amount of student loans doesn’t mean you should use it all. The reality is that borrowing money is really easy, while paying it back can be a painful process. Devise a budget for the school year, factoring in how much you can earn while at school. You’re likely to face a shortfall; student loans are a good way to help you bridge this shortfall, but only take what you need. You may be tempted to use credit cards to help out, this is a dangerous step and one to avoid. It’s hard to ignore the allure of credit cards, especially when it seems like there is a kiosk around every corner, promising you the world, if only you would use their credit card. Resist! Credit is neither good nor bad, it’s all in how you use it, and at this stage, it’s too easy to accumulate credit card debt, and far too hard to pay it off. If your student loan and part-time work aren’t enough to fund your needs, it may be time to revisit your budget and look to see where you can trim. Your future self will thank you!

3. Failing to make a monthly and yearly spending plan

As noted above, a good budget is critical. Before the school year gets into high gear, sit down and plan out all of your expenses. You’ll need to account for tuition, books, supplies, student fees, transportation, and entertainment – we have to keep the budget real, and we both know that there will be entertainment expenses while in university! You might want to go to www.mymoneycoach.ca/budgeting/budgeting-calculators-tools/student-budget-worksheet and use our free student budget calculator worksheet; it will help you spot your costs and help you create a budget. Without making a plan and closely monitoring your expenses, you increase the odds of running out of money. Final exams are stressful enough. Don’t add the pressure of wondering how you’ll make ends meet!

I don’t have enough room in my article for a complete reply, so you will have to tune in next month for Part II!

Tim St Vincent is a retired CFP (Certified Financial Planner) and is a Certified Educator in Personal Finance with the Credit Counselling Society (CCS), a non-profit organization. If you wish to contact Tim or the Society for further information or to request / attend a workshop / webinar, please call 1-888-527-8999 or go to www.nomoredebts.org or www.mymoneycoach.ca

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