Going to university is an exciting milestone, but it can also be an expensive one. Between tuition, textbooks, and daily expenses, the cost of school can add up quickly. Many Canadian students have to rely on student loans to fill the gap. Learning how to create a budget, use credit, and manage your finances before you head off to school can help you avoid taking on large sums of student debt and making financial mistakes that can follow you for years after graduation.
Here are seven financial mistakes to avoid at university or college and tips for how to avoid them.
1. Not Having a Budget
Every student should have a budget. While going to university is supposed to be fun, if you want to avoid spending too much on things like alcohol, partying, and bars – a budget can help. A budget is a plan for your money. It highlights how much money you have coming in (income) and what’s going out (expenses). It’s an effective financial tool that can help you keep track of your spending so you can avoid going into debt.
How to avoid it. Today, there are many online budgeting tools and apps that you can use to create a budget, automatically track your spending, and work towards your financial goals.
2. Racking up Credit Card Debt
University is often the first time students are exposed to credit cards. If you’ve never learned how credit works or how to manage it effectively, it’s easy to make mistakes. Many students find themselves with a maxed-out credit card and insufficient funds to repay it. If you can only afford to make the minimum payment, most of your money will go to interest, and it can take forever to pay off your card.
How to avoid it. First, stick to your budget. Second, only use your credit card if you know you can afford to pay it back in full each month. This way, you can avoid paying interest while building your credit score. Third, stick to one credit card to avoid overspending, at least until you’ve mastered responsible credit use.
3. Neglecting Student Discounts and Deals
From free bus passes to discounts on clothing, subscriptions, and laptops, university students have access to a wide range of deals. Make sure you don’t miss out on savings by using your student status.
How to avoid it. Anytime you go to a store, book travel, or visit a museum or attraction, ask if they offer a student rate or discount. Make sure you always have your student ID on hand so you can prove your status. You can also sign up for student deals using the Student Pricing Card (SPC) app. It allows you to access all kinds of discounts and deals at participating stores and online.
4. Taking Out More Student Loans Than Needed
Many students overestimate the amount of money they need for tuition, housing, and school supplies. By taking on more student loans than you need, you may find it tempting to spend the money, sending you further into debt. This will result in more time spent trying to pay off your loans, plus loan interest, once you graduate. Do your future self a favor and try to minimize your student debt.
How to avoid it. Before applying for student loans, do some calculations to estimate what you really need. Research living costs, tuition, books, and other school expenses to determine a reasonable estimate. You can also consider getting a part-time job to bring in more money or living at home while you go to school to reduce your costs.
5. Not Building an Emergency Fund
An emergency fund is a pool of money that you save up for unexpected or emergency expenses. Say your laptop dies in the middle of the term, and you need money for a new one. Or someone in your family gets ill and you need to travel home to see them. Having money saved up can prevent you from turning to your credit card or taking on other sources of debt to fund the expense.
How to avoid it. Even if money is tight, start putting away what you can afford each month. Or to set up an auto transfer each week, where a small sum is transferred into your emergency account. The goal is to be consistent with your savings so it becomes a habit. Keep your emergency fund in a separate savings account, such as a high-interest savings account (HISA), so you’re not tempted to spend it.
6. Missing out on Scholarships
You may have heard the saying, “You miss all the shots you don’t take.” This is true when it comes to scholarships. According to Scholarships Canada, millions of dollars in scholarship money go unclaimed every year because students just don’t apply.
You may talk yourself out of applying because you didn’t get straight A’s in high school and don’t think you have a chance. But, there are all sorts of scholarships to try for. Some are based on grades while others are need-based, available to minorities, or awarded for athletics or art.
How to avoid it. Search sites like Scholarships Canada and EDUCanada to find appropriate scholarships. Then put in the time and effort it takes to apply for a range of scholarships, because you never know what you can get unless you try.
7. Ignoring Student Loans and Financial Aid Deadlines
The process of applying for government or private student loans and financial aid can be complex. Trying to keep track of application deadlines for loans, grants, and scholarships can feel overwhelming. But missing important deadlines can lead to a significant financial burden and can potentially delay your education if you don’t have the resources to pay.
How to avoid it. Start researching student loans and financial aid early. Then set reminders and deadlines in your phone or on a calendar. If you’re applying for government student loans, you can apply for both federal and provincial or territorial funding with one application. For a list of provincial and territorial student aid information, visit the Government of Canada website.
Start Building Smart Money Habits Today
Awareness is the first step to avoiding the common financial pitfalls that many students experience at university and college. Increasing your financial education by reading books and websites about money and personal finances can improve your knowledge and understanding. You can also set yourself up for success by creating a budget, applying for scholarships, and minimizing student debt. Finally, consider speaking to a professional like a Licensed Insolvency Trustee (LIT) or a credit counsellor, to learn more about budgeting, responsible credit use, and money management.
If you find yourself struggling with debt from student loans or other sources, you can contact a LIT at Allan Marshall & Associates for a free, no-obligation consultation. A LIT can assess your finances and help you find a debt repayment strategy. From Consumer Proposals and Bankruptcy, to credit counselling advice, LITs can administer the widest range of debt solutions. Give us a call at 1-888-371-8900 or complete our online contact form.
