Between trying to fund a variety of expenses, higher tuition costs, electronic purchases, saving for the future and repaying debt, today’s students often rely more heavily on student loans and part-time jobs during the academic year than past generations.
“Rising tuition costs are stretching student budgets, as are the technological requirements like having a personal computer, but so is the long list of goals like travel, personal debt repayment, and saving for a home and retirement down the road,” says Raymond Chun, senior vice president, Everyday Banking, Personal & Indirect Lending, TD Canada Trust.
According to TD research, students say the top reasons for taking a summer job are to pay for tuition, school-related expenses and day-to-day living costs.
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And today’s students are 18% likely than their parents’ generation of students to use a part-time job during the school year to pay for discretionary spending, and more likely to use student loans to fund school. They’re also more likely to allocate funds towards a savings account or a down payment on a future home.
“It’s important to have financial goals, and today’s students are clearly thinking ahead,” says Chun. “But with such a big wish list, students need to think realistically about what’s possible, establish a budget and prioritize spending to help stretch their earnings as far as possible.”
Read: Half of post-secondary students go into debt
Here are some tips to help students.
1. Set a realistic budget. Tell clients to be honest and list all sources of income, like pay cheques, scholarships, family support, student loans — and known expenses, like tuition fees, rent, books and basic living costs. Anything left over can be allocated towards savings goals and discretionary spending.
2. Prioritize spending. Essential costs like tuition, supplies and rent should be the top priority, followed by any debts that are incurring interest. When it comes to discretionary spending, make sure splurge items mean something — like dinner out with friends versus eating a small lunch out every day.
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3. Reminds them credit is borrowed, not free. Using a credit card is a great start to building a healthy credit rating, but the balance should be paid off in full each month to avoid interest charges. These extra costs will eat into an already tight budget.
4. Stay on top of finances. Get students to take advantage of online statements to keep track of what is owed and the interest rate. Help create a plan to pay off student debt after graduation and increase payments as their incomes rise.