The lump-sum nature of student income makes budgeting more important.Govindanmarudhai/iStockPhoto / Getty Images
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High youth unemployment, the rising cost of living and overbooked student housing are making life more complicated than usual for students returning to – or beginning – university and college this year.
A Maru Public Opinion survey conducted on behalf of Toronto-Dominion Bank (TD) released in late August found that 65 per cent of students defined themselves as financially unstable, with almost half (45 per cent) unable to cover basic needs such as food and housing.
“In the past, students might have found a summer job to cover their tuition, housing and living costs throughout the year, but now it’s not that easy,” says Doug Hoyes, a licensed insolvency trustee and chartered professional accountant with Hoyes, Michalos and Associates Inc. in Toronto.
The average annual undergraduate university tuition fee for Canadian students climbed to $7,076 for the 2023-24 school year from $6,468 for the 2019-2020 term, according to Statistics Canada.
Meanwhile, Statscan figures from April this year showed that the youth employment rate had dropped to 55 per cent, its lowest level since February, 2012 (not including the pandemic years of 2020 and 2021).
Advisors can help students – often their clients’ children – develop budgets and avoid significant debt.
Beyond financial aid and government loans, there are grants, bursaries and scholarships available.
“I would encourage all students to do some research and speak to their [institution’s] financial aid offices about what’s available to them. Bursaries are pretty esoteric, so investigate every possible thing that could be available to you,” Mr. Hoyes says.
Alim Dhanji, senior financial planner with Assante Financial Management Ltd. in Burnaby, B.C., recommends a high-interest savings account (HISA) for storing the cash students plan on spending. A HISA that students can add to and pull money from freely is especially valuable for students who rely on cash they make over the summer or receive through student loans and bursaries, which are usually paid in lump sums.
“HISAs are boring investments, but they’re safe and could earn students some extra money on top of whatever cash they have,” he says.
The lump-sum nature of student income also makes budgeting more important, says Robin Taub, a chartered professional accountant in Toronto and author of The Wisest Investment: Teaching Your Kids to be Responsible, Independent and Money-Smart for Life.
Students should make a habit of using mobile banking applications to keep track of their money and what they spend, she says. “It gives them a visual sense of loss,” she adds, which can help curb excess discretionary spending.
That could help keep students out of debt, which is always a temptation as students are inundated with credit card offers on campus, she says.
The TD survey found 64 per cent of students had some form of budget to track their money expenses, but less than half (41 per cent) said they’re able to follow it regularly.
For students unable to make ends meet, Mr. Dhanji says personal loans, co-signed by a parent, could help cover expenses and avoid the high interest rates that credit cards carry.
“With a secured or co-signed personal loan, students might be able to get an interest rate of prime plus 1 or 2 percentage points on an unsecured loan,” he says. “Students just want to make sure they’re making their payments on time and building their credit score.”
Another healthy financial habit for students is filing taxes on time and learning about the tax credits available to them. Registering with the Canada Revenue Agency (CRA) allows students to see those credits.
For example, students who leave home to study may be eligible for tax credits on their relocation expenses if they move more than 40 kilometres, Ms. Taub says.
“There is also the 15-per-cent federal tax credit students can claim on their tuition and is partially transferable to their parents,” Mr. Hoyes says.
For benefits and payments that most Canadians receive, such as the Canada Carbon Rebate, he says students should register on the CRA website for direct deposits to their bank accounts.
“It might not be a big amount of money, but as a student on a tight budget, an extra hundred bucks in your pocket can make a big difference,” he says.
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