As students make the leap from high school to college, many have little or no experience with managing money. This can make designing and sticking to a budget a challenge, according to Kurt Rosentreter, a financial advisor at Manulife Securities.
“Kids coming out of high school have very low financial literacy,” says Rosentreter.
Not knowing how to budget properly during your college or university experience can create challenges down the road and make debt more overwhelming upon graduation says Rosentreter.
“Coming out of school after four or five years with $100,000 in debt is one of the worst things that could happen to you,” says Rosentreter. “It’s a burden on your back that will limit your ability to get debt for future purposes, like borrowing to buy a home or a car.”
College is an exciting time in a new student’s life: the trips to Wal-Mart for the mini fridge to hold your snacks, lamps for your desk for late night studies, bulletin boards to manage classes and hangers to hold your clothes.
But what about money?
The college experience may be different for everyone. Some students might receive a set amount of cash every month from their parents whereas others might be entirely responsible for their own money, making it more challenging for students to properly budget.
Freshman year, for example, is the year when a student is most likely to be living in a dorm and eating on a meal plan. This means spending money on “wants” like late night pizza and weekend adventures with friends.
Budgeting takes discipline and there are lots of ways to ensure you are properly saving your money. One way to save is thrift shopping. According to an article by The Globe and Mail, the average Canadian family of four saves about $1,150 each year by buying second-hand items, with total spending on used goods clocking in at nearly $30 billion.
Carolyn Schneider, author of The Ultimate Consignment & Thrift Store Guide, says that the average discount a shopper can find on clothing in thrift stores is up to 50 per cent off.
Being a budget conscious student can work out in the long run. The savings you make can add up over the course of your schooling.
It is also important to be wary of credit cards. Try not to give into the temptation of borrowing money, if you are not diligent about paying off your balance in full every month.
For example, according to the Government of Canada, if you have a $1000 balance on your credit card and the minimum payment is two per cent of the balance and you only make the minimum payment, it will take you 19 years and four months to pay off your balance owing. You would have paid $1,931 in interest. Therefore you would be paying almost triple the purchase price.
Advisors at Durham College and UOIT also stress that students take advantage of the programs are available to them.
Chris Rocha, Director of Financial and Awards Services at Durham College and UOIT says that very few students think about budgeting when entering the school year.
“First-year students are the hardest hit when it comes to financial trouble, because they’re often out on their own for the first time,” says Rocha. “We stress that budgeting is key.”
The campus financial services office offers a number of options for students to help with budgeting like one-on-one counseling, information on government loans and even a work-study program that pairs students with part-time jobs on campus.
Unfortunately, very few students take advantage of these services until they are in over their heads in debt and have no money left to support them throughout the school year.
College or university will be the years when your ability to prioritize will become apparent. If you want to do some shopping but don’t have the funds to support your spending habits, simply see what resources are available on campus. This could result in a part-time job to earn some extra cash.
If you need to do some clothes shopping on a student budget, head over to your local thrift shop where you can buy an outfit for less than 20 bucks.
But make sure your spending is done safely. It’s not the best idea to give into credit card offers. Unless you want a high interest rate and a not-so-great credit score, make sure you have the funds to make the monthly payments on time beforehand.
Total your income, total your expenses and then, finally, make sure that your budget balances. These are some of the ways you can, as a student, learn how to become successfully independent, personally and financially.
Don’t get sucked into the world of student debt by panicking and becoming $1000 more in debt by getting yourself a credit card. Explore your options and do your research, then you might be able to plan a March break trip without worrying about the expense.
For more on budgeting, see the Chronicle online for Mariah Pardy’s column, Broke Fashion.