Data from Statistics Canada shows that the average Canadian university graduate comes out of school with student debt in excess of $26,000. According to a recent poll by Ipsos Poll on behalf of BDO Canada conducted between 16th August and 21st August 2017, 77% of Canadian graduates regret having student debt. 30% of the graduates say they wish they had more frugal budgets, 28% wish they had worked more while at school, and 25% wish they would have avoided even more debt by staying away from car loans and credit cards.
Given these stats, it is clear that if you have to take student loans, you should manage it properly and save as much as you can to avoid the pinch when the time comes to repay it. Proper money management and the inculcation of a saving culture also help you form good habits that will help you later in life.
1. Make and Stick to a Budget
Make a budget and ensure the loan funds academic-related costs first. According to Financial Consumer Agency of Canada, the funds should go towards tuition fees, student fees such as administration fees and student union fees, health insurance, course materials such as books, living expenses, food, transportation, and entertainment. Just as important as making a budget is sticking to it.
2. Take advantage of Tax Credits and Tax Deductions for Students
There are many tax credits and tax deductions available for students in part-time and full-time jobs. File your returns in good time and claim tax credits and tax deductions where applicable.
Non-refundable tax credits reduce the amount of tax you have to pay and are applicable for such costs as tuition fees, public transit, books, and interest on student loans. Tax deductions reduce your taxable income and are applicable for such costs as child care expenses and moving expenses.
3. Use an Online Money Management Services
There are several apps, a good example being Mint, that can assist you to manage your money better and more easily. College students are usually too forgetful or busy to keep track of their incomes and expenditures, but Mint allows one to upload his/her expense info and bank account for easy management from a central place.
4. Save on Course Material Costs
On average, course materials such as books add up to $800 – $1,000 per year, depending on the course. You can cut down on this cost by:
- Buying used books
- Getting electronic version of books, articles, and other course material
- Buying textbooks from an online retailer (which is usually cheaper than buying from a campus bookstore)
- Sharing textbooks with classmates or roommates where practical
- Selling textbooks after you are done with them
- Using an older edition of a textbook
- Avoid “suggested materials” from professors because most do not contribute to you passing the class.
- Websites like Chegg have textbooks available for rent
- Some schools have textbook rental programs
5. Protect Personal Information
Cybercrime such as identity theft is real in college. According to a recent study by Javelin Strategy and Research, young adults in the 18 to 24 demographics are at the highest risk for identity theft. To avoid identity theft:
- Ensure you use strong passwords
- Do not write passwords down or share them with anybody
- Do not share your Social Security numbers
- Ensure personal documents are always secured
- Check credit and bank accounts regularly for and report suspicious activity immediately
6. Save on Living Expenses
Living expenses take a big chunk of your expenses during school time. You could cut on the cost by opting for shared student residence in Toronto as opposed to single rooms. You can also live off campus to save money. You could move in with family or roommates. Visit your school’s site for estimated costs of living both on and off campus.
7. Save on Grocery Costs
To cut down on grocery costs, explore grocery stores that offer student deals on certain days of the week. Whenever you are shopping, ask if student discounts are applicable. Many schools also offer meal plans for students who live off campus and you should consult your school on these plans.
Consider cooking for yourself because eating out can be a big expense. Many schools also offer meal plans for students living off campus. Contact your school for more information on these plans.
8. Save on Health Insurance Costs
If you have private health insurance with your family or job, you may opt out of your school’s coverage to save on health insurance costs. Most schools, however, require that you opt out of health insurance in the first few weeks of the school year and that you provide proof you have the said private health insurance.
9. Save on Transport Costs
If you require public transit to get to and from school, consider getting a public transit pass. Note some schools provide transit passes as part of the tuition fee.
You are better off not using a car while in college. Parking costs, gas costs, and maintenance costs are way more than you would pay for a monthly public transit pass. Walk or ride a bike whenever you can not only to save money but also to keep fit.
You should also take advantage of student discounts offered by most airlines, passenger trains, and bus companies, especially when going home for summer vacation or a visit.
10. Get Other Sources of Income
Consider tapping into other sources of income to reduce the loan you have to take. Examples of such sources of income include:
- Working to help pay for education (most colleges have work-study programs that offer flexible part-time gigs).
11. Avoid Credit Cards
Student credit cards and student line of credit from financial institutions are a popular source of income for college students. Colleges and universities are popular advertising spots for banks and credit card companies, with the average annual interest rates for a student credit card being 18.11%. Most credit card companies lure students with college-centric offers like free college swag and free concert tickets.
Avoid these options whenever you can because they put you in a vicious cycle of debt. Debit cards are a better option but do not take advantage of their overdraft facilities.
12. Set up a Bank Checking Account
A bank checking account will go a long way in helping you manage your money. Most banks have products designed specifically for college students and they have such features as free checking and saving accounts, which helps you avoid fund transfer and withdrawal fees. Go for a bank with ATMs near your campus to avoid out-of-network charges.
13. Save on Entertainment & Miscellaneous Costs
College usually leaves students with a lot of time to spare. This and the average age of students make entertainment a major cost. To save on entertainment as well as cell phone, clothing, and other miscellaneous costs, consider going for what you need instead of what you want. Other tips to save on entertainment/miscellaneous costs are:
- Take advantage of student discount cards whenever you can.
- Go for a campus gym as opposed to a gym in town.
- Share Netflix/cable/Internet costs with roommates or classmates.
- Use free services like Spotify or Pandora instead of buying music.
- Do not buy name brand items. Generic items provide the same quality at a much lower price.
- Get involved in the many campus activities available to students as opposed to going out. Many campuses offer movie nights, have an array of museums, and have many sports and social facilities for students.
- Skip expensive summer trips and spring breaks and look for such alternatives as volunteering for your favorite cause.
- Wait until you are out of campus to own a pet. Having one on campus is quite expensive.
Make a budget first and then get a student’s loan based on this budget and other source of income. However, note that the cost of living expenses may increase due to inflation. In Canada, this has been 2% per year over the past few years. Consult your parents, professors, and other role models on money management and saving tips.