University and college students gearing up to hit the books this fall have no choice but to think about time management: How to fit study sessions in between all those classes and pub crawls? Add money management to the equation — and the earlier the better.
A new survey from TD Canada Trust involving current undergrads and people who’ve completed post-secondary education in the last three years found that 38 per cent wish they’d stuck to a budget during school and 43 per cent wish they’d curbed spending on discretionary items like coffee and gadgets.
Another 35 per cent wish they’d looked for more ways to save money, while 31 per cent regret not using credit cards more responsibly.
“With the average cost of an undergraduate degree currently estimated at $84,000, it’s imperative that students do their homework on how to manage everyday finances, stretch their student dollars, and avoid excessive debt,” says Raymond Chun, a senior vice president at TD Canada Trust. “University is full of tempting opportunities to spend money, which is why it is so important for students to create a budget and learn when and how to say ‘no’ to things they cannot afford.”
Student budgets differ from those of retirees living on a fixed income as well as people just starting a career. But those groups all share the need to have some sort of plan to guide their financial path given funds are tight.
“Regardless of your life stage, creating a realistic budget and monitoring spending is essential to managing your finances while avoiding excessive debt,” Chun says. “Students may not have a steady stream of income throughout the year. This makes it even more important to create and follow a budget from the start to ensure there is enough income to cover expenses. While new graduates will have access to additional income once they start working, most will also have additional financial obligations that need to be taken into consideration when budgeting, including repaying debt and saving for the future.”
Part of what distinguishes the financial challenges of students and others is experience.
“Students are starting a new phase of their lives, with newfound freedoms where it is very easy to be impulsive when it comes to new experiences that could cost money,” says Daniel Collison, Investors Group regional director. “Retirees are also starting a new phase of their lives, but they tend to have a better idea of their expectations and should have an easier time budgeting and planning.”
When drafting a budget to suit their lifestyle, students need to be mindful of certain pitfalls, Collison says, such as:
- Underestimating the additional costs of going to school such as books, lab fees, computer, cell phone, and the like.
- Ignoring the “social” costs of being in school such as reading-week trips, pub nights, movies and other entertainment. “In scenarios like this, friends might pressure one to come out and spend beyond their means or the student might find the allure is too compelling to ignore,” Collison says.
- Ignoring sound financial advice from parents, older siblings and other students already in school, and the institution they’re attending itself.
- Disregarding the future interest and principal costs of student loans and the impact this will have on them when they graduate.
If budgeting seems overwhelming for those embarking on post-secondary studies, it doesn’t need to be, says Mike Henry, senior vice president and head of retail payments, deposits and lending at Scotiabank.
“A lot of people think ‘financial planning is not for me, that’s for people who have a lot of money,’” Henry says. “But it’s simply how much money is coming in, how much money is going out, and what’s important to you. And that’s as relevant for a student as it is for anyone else.
“When you’re young it can be hard to look way down the path, and if that’s the case let’s make it bite-size: let’s do a five-year plan. Once you’re done school, we’ll do another five-year plan,” he adds. “We want to encourage students to build good [financial] habits early in life that will serve them well throughout life.”