Post-secondary education isn’t cheap, and it’s not just tuition you need to worry about. It’s living expenses, textbooks, fees, groceries, entertainment, and more, all while you’re spending most of your time studying instead of working. For most students, living off of student loans, part-time jobs, or savings is a common situation. It’s also one that makes you acutely aware of the price tag on everything.
Whether it’s your first time headed off to college or university, or you’ve already got campus life figured out, it never hurts to review your financial habits. Student loan debt isn’t easy to get out of. On average, it takes Canadian graduates 10 years to pay off their student loans and even longer if it takes some time to find employment in your field.
The longer it takes you to pay off your student loans, the longer it takes before you can start pursuing other financial goals. Do yourself a favour while you’re still a student. Take your budget seriously and cut your costs wherever you can. You’ll be giving your future self a leg up when you’re trying to pay it all back and move on with your life.
Avoid These 6 Student Spending Mistakes
There are spending mistakes we make at all ages, and some that are more age-specific. Here, we’re going to look at some of the most common money mistakes post-secondary students make during their time on campus. From the big picture stuff to the little details, avoiding these mistakes will help you save money.
#1 Not Understanding Your Student Loan
There are several different types of student loans available to finance your post-secondary education. The most common are provincial loans, as well as federal loans provided in partnership with provincial agencies.
If you qualify for them, these are often the best loans to take out. You will have to pay it back with interest, but there are grace periods based on your studies and repayment assistance plans if you struggle to pay them back.
It’s a different story with private loans, including student lines of credit. Major banks offer student lines of credit for people who are not eligible for provincial and federal loans, but interest starts to accumulate immediately, and you have to make interest-only payments during school. In this way, it functions like any line of credit. You may also face variable interest rates, meaning the costs could become unpredictably high.
#2 Using a Credit Card Without a Plan
When money’s tight, it can be tempting to turn to your credit card to make up basic expenses. Without a plan for paying that money back, though, you’re going to be stuck in a debt trap. With no way to pay the money back, you’ll be facing high penalties and damage to your credit score. Even if you can make minimum payments, you’ll face high interest charges.
#3 Paying ATM Fees
ATM fees on your debit card can add up if you’re constantly using them. Plan your cash needs in advance so that you don’t have to rely on non-branch ATMs.
But besides making sure you have cash on hand, one thing you should never do is use your credit card at an ATM. Although most places today accept credit cards, there are some holdouts that won’t accept plastic. If you don’t have money in your bank account, don’t be tempted by using your credit card. It’s considered a cash advance and has much higher interest rates and costs than using your card normally.
#4 Spending Too Much on Groceries
Life can be hectic as a student, and with all the eating out, just going to the grocery store at all can feel like you’re saving money. However, grocery shopping for one can be surprisingly expensive, especially if you’re not in the habit of using all of your leftovers.
Always grocery shop on a budget, knowing exactly how much you can afford to spend and basing your decisions around that. Grocery stores can leave you feeling fatigued due to decision-making, which breaks down your defences against impulse shopping. Always make a list, and if you have the time, search for deals at different stores.
#5 Going Out Too Often
Your student years are an exciting time in life. It may be the first time you’re living without your parents. You’re meeting all kinds of new people, and you might be living in a new city. Naturally, you want to go out and enjoy the company of your friends, try new things, and get to know your new home.
It’s important to give yourself a budget for going out and entertainment so that you can enjoy your student years. As long as you have a plan, you can still have fun without spending too much.
#6 Buying Coffee All the Time
Coffee is the favourite target of financial advice columns. You’ll hear this piece of advice everywhere, but that’s because it’s both surprisingly expensive and an easy target. As a student, you’re out all day and sometimes all evening, especially if you’re also balancing a part-time job. It’s easy to buy your coffee out, not to mention takeout meals.
Unfortunately, it’s also an easy way to wind up spending more than you expected.
Keep track of all your spending when you go out, from takeout coffee to a quick lunch, as it can add up. Once you see exactly how much money you spend this way, you may be more inclined to make coffee at home before heading off to class or pack a lunch of leftovers instead of grabbing that slice of pizza.
Of course, there will be days when better habits fall victim to all-nighters and pre-exam cramming. When you really have no choice, skip the $5 specialty coffee and go with a more affordable option.
How to Develop Better Spending Habits
Living frugally as a student will equip you with the right habits to be debt free in the future. There are financial lessons to be learned in these years that can benefit you for the rest of your life. These are some of the best ways you can pay off your student loans sooner and make sure you stay out of consumer debt for a long time to come.
Pay Your Credit Card in Full
The best way to use a credit card is to pay it in full every month. When you’re young, neglecting to use your credit card or not having one at all may mean you don’t have a credit history. That can make it harder to qualify for loans in the future or even prevent you from getting an apartment.
By using your credit card but always paying down the full balance, you establish a credit history but never get charged interest.
Start an Emergency Fund
An emergency fund is money that you’ve set aside to pay for unexpected costs. It’s a source of money you can reach for instead of your credit card. You won’t wind up stuck paying interest for car repairs you had to put on your credit card, which only makes them more expensive.
The size of your emergency fund should change with your circumstances. At first, just saving up $1,000 will go a long way. As you get more established and pay off student loans, you may want to save up anywhere from three to six months’ living expenses. This will help you bridge periods of unemployment without charging your credit card or a line of credit.
Stick to Your Budget
A budget is just as important later in life as it is when you’re a student. Your budget is a plan for your income. When you are debt-free, you can spend it however you want. If you want to put all of your savings toward your retirement, that’s your choice. You can also spend it on a dream vacation or a new car if you prefer. The point is that a budget allows you to make those choices without getting back into debt. It helps you look honestly at your finances and break your bad spending habits before they lead to financial problems.
What Can You Do About Debt After Graduation?
After graduation, debt can feel like a burden that’s holding you back. If you’re financially able, you don’t have to limit your payments to your repayment plan. You can increase your monthly payments or even make lump-sum payments.
It’s a different story if you’re struggling to pay them back, especially if you don’t find a career in your field right away. Student loans are subject to a seven-year wait after you graduate before you can file for insolvency on them. A Licensed Insolvency Trustee can help you with other debts, such as credit card balances that you can’t afford to pay. Clearing your other debts can help you focus on your student loans. If you’re still struggling with them and you meet the eligibility requirements, there are also repayment assistance plans that allow you to defer those debts.