7 Financial Mistakes to Avoid at University
Q: Our son is attending his first year of university and while we haven’t been able to set aside any money for his education, we are providing free room and board while he attends a local university in our city. Unfortunately he will need to take out a student loan to cover some of his school related expenses as he hasn’t saved up enough money from his part-time job over the past two summers. In truth we haven’t been the best role models for our son when it comes to money management and we are looking for some advice and/or tips to help him get off to a good start and avoid graduating with a mountain of debt. Thanks! ~Chris
A: Post-secondary education costs continue to rise in Canada, with the average university student graduating with over $26,000 in student loan debt. When you factor in other forms of debt like credit cards and bank loans the number is easily over the $30,000 mark.
Where you go to school, how you manage your costs during your school years and the money decisions you make will have a significant impact on how little or how much debt you graduate with. I recognize that attending university for the first time can be a little intimidating; it’s easy to make mistakes and get caught up in the university experience if you don’t have the knowledge and safeguards in place to protect your finances.
1. The Big Money Mistake Post-Secondary Students Make
Your son is already avoiding one of the big money mistakes many post-secondary students make – he’s living at home. While some specialized programs may require a student to attend university in another city, they can save a significant amount and graduate with a lot less debt if they are able to stay living at home with at least some support (e.g. the free room and board you’re providing).
Here is our list of 6 more money mistakes students make while attending university:
2. Borrowing More Than You Need
Just because you qualify for a certain amount of student loan funding doesn’t mean you should take it. The reality is that borrowing money is really easy, while paying it back is typically a long and somewhat painful process. Challenge yourself to get by with the bare minimum amount of debt you will need to see yourself through to the end of the school year. Your future self will thank you.
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3. Failing to Make a Monthly and Yearly Spending Plan
Before the school year gets into high gear sit down and plan out all of the expenses you will incur each month and over the school year. You will need to account for the cost of tuition, books, supplies, student fees, transportation and other costs. Our Student Budget Calculator Worksheet, available as a free download from our educational website, is an interactive tool that will help you identify all of your monthly costs and create a budget that you can follow. Without making a plan and closely monitoring your expenses each month you increase the odds of running out of money before the end of the semester. Final exams are stressful enough. Don’t add the pressure of wondering how you will make ends meet in December.
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4. Learning to Living Frugally
Living frugally is the new cool and it doesn’t mean doing without; it means being smart with your money and getting great value for what you do spend. It also means having a clear understanding between your needs and your wants. While there are some costs that you can’t control like tuition, there are lots of areas where you can minimize your spending like buying used books, avoiding the trap of buying the latest, greatest technology, using your student ID for discounts and taking advantage of any free or low cost events that your school puts on.
Get in the habit of making every dollar count. Before spending even a small amount of money, stop and ask yourself if you need to spend the money. I visited a college campus last spring and was amazed at how long the lineup was for coffees and lattes at the national coffee outlet conveniently located inside the college. Three lattes a week during the school year could easily lighten your bank account by $1,000. I can’t stress enough that every dollar counts.
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5. Missing Out on Scholarships, Grants and Bursaries
There is over $100 million available in scholarships, grants and bursaries in Canada each year, and each year millions of dollars remain unclaimed by students. Sure the big scholarships are snapped up fairly quickly but there are lots of $250 – $1,000 grants and bursaries available that can help to cover your school related costs. Contact the financial aid office at the school you plan to attend for more information, and talk to your school counsellor as well. Investing some time upfront could potentially bring in hundreds if not thousands of additional funds to help you get through the school year.
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6. Not Working Part-Time While Attending School
Working during the school year will help you to cover off your living and other expenses. You can build upon this by working full-time in the summer months and substantially reduce, if not eliminate the amount of money you will need to borrow next year. Depending upon your field of study there may also be opportunities to enter into a co-op program where you attend school for part of the year and then work in your future field of study. Co-op and work-study programs don’t just help your bank account; they’re a great addition to your resume.
7. Choosing a School for the Wrong Reasons
One of the frustrations we hear regularly from post-secondary graduates who come to us to with student loan problems is that they question the value of their education in relation to the amount of debt they have incurred. It’s not a pretty picture at times, and it could have been avoided or minimized if students, with some help from their parents, a high school counselor or an academic advisor, worked through the different financial scenarios of:
- Living away from vs living at home
- Attending a community college and then transferring to a university
- Attending a prestigious vs a community university
- Attending university vs working until you have a clearer idea of your future career aspirations
The time spent working through these different education options and perhaps coming to the conclusion that university may not be right for you, or not right at this time, could end up saving a person tens of thousands of dollars.
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The Bottom Line on Avoiding Financial Mistakes at University & During the Post-Secondary Years
Knowledge, a solid plan and good decision making are the keys to avoiding the common money mistakes students make during their post-secondary years. While you may not be able to graduate completely debt-free if you avoid these 7 money mistakes, you will graduate with a lot less debt, a lot less stress and be able to move forward more quickly financially as a result.
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