Financial tips to get your studies started off on a good footing

When it comes to financial know-how among post-secondary students, Zach Prusko said the majority of students don’t have a good grasp on money and budgeting.
“When we first started, we placed a bunch of posters around the university saying we would help you to get grants or to open a TFSA and manage your investments,” said Prusko, a University of Alberta MBA student who founded the website graduateplanning.com, which also has a location on campus.
“Our posters for grants in the first month got 3,000 sign-ups, and the poster for financial planning got 45. It was a clear indication of what people really care about. We still focus on financial planning, that is what we spend most of our time doing, but we get people in with the grants, that is our marketing,” he said.
A former financial planner at one of Canada’s big five banks, Prusko works with students to apply for grants and scholarships, get the most out of their budgets and credit scores, and improve their investments and savings.
“A lot of the reason is that it is not a large priority,” he said about students’ lack of interest and knowledge of personal finance. “When you have mid-terms and final exams, putting aside a little money doesn’t make a lot of a difference, especially since you do not have a lot of money.”
Prusko said it’s his experience that students don’t want to keep a detailed budget. Plus, their income is odd. There is often no paycheque every few weeks. It is one or two big ones, and then you are left to figure it out.
“You get a big lump sum of money in September and again in January — and it’s, ‘I need to make this work, make this last.’ And generally, what happens is that if you use a budgeting app, they are based on having a stable income. It just doesn’t work with a student situation.”
Instead, what he likes to do is use apps such as Daily Budget or Today’s Budget. They start by asking the user questions about your rough monthly costs and your savings. They will then tell you how much money you can spend on a given day.
Prusko will also help fellow students set a separate bank account where all your costs for several months — such as rent and utilities — are placed. Those payments are then automatically withdrawn each month to pay those bills. “Everything left in your own chequing account is the money you are allowed to spend.”
Barry Choi is a Toronto-based personal finance expert who writes about credit cards and Gen Z money on his website moneywehave.com. He said a lot of students lack the financial education to understand how credit cards work — which they are likely to sign-up for in their first year.
“Students should look out for those offers that are just not very good. What you will probably see is booths set up on campus — get a free t-shirt and you can spend as much money as you want, up to your limit, right away. That is to lure you in to get a credit card, but a lot of people don’t realize they are not free and there are high interest charges if you don’t pay them off each month.”
He said the interest rate on the card doesn’t matter if you are paying off your bill in full each month, but the problem, he said, is that a lot of students don’t understand how credit cards work.
“You make a purchase, you use your card and get your bill, and you see a minimum payment required, say $100 or whatever. So, they make that minimum payment thinking it is all they need to do not realizing they are accumulating interest.”
Here is Choi’s Credit Card 101: With a credit card you are getting an interest free loan for 21 to 30 days. As long as you pay off that entire amount you put on the card, you pay no interest. But, if you pay anything less than the full balance each month, you pay interest. If your card, say, has an interest rate of 20 per cent, and you spend $1,000, then that is $200 a year you pay in interest.
“It doesn’t sound like a lot but it is because traditionally people who are not paying their bill in bulk will keep making minimum payments and pay a little more each month because they think they are good, but those interest payments keep racking up and they fall in that debt cycle.”
He said when it comes to financial education, neither parents nor schools do a good job of explaining this. There are some parents who are money savvy and good at talking to their kids about money, he said, but there are also a lot of parents who rely on credit, and they may not even be aware of how interest rates work or how they affect them.
Choi said there are a lot of credit card choices out there, unlike when he went to university nearly 30 years ago — and many times you can get them right away without needing to wait.
Choi said students, with their limited income, are likely only going to qualify for a few types of credit cards. He said it is best to go to your bank and apply for a credit card there so you can start building your credit score and learn to use a card responsibly. If a student does have income — a parttime job making more than $12,000 per year — their card options will increase. He said you should also look for a card where you get travel awards or cash back.
When it comes to credit card limits, you may automatically qualify for a set amount, but there is nothing stopping you from contacting them and asking for it to be lowered. He said that with the card, you should only buy things that already fit in your budget — things you can pay off in full once you get that bill. Avoid the extra things you can now buy because you have a card and the mindset you can always pay it off later.
“Building credit is always going to be important, especially if you need a loan with interest, like a car loan or a mortgage. But I think learning to manage credit is arguably more important,” said Choi.
“For a lot of students going to post-secondary school for the first time, they are also getting their credit card for the first time. Maybe they had a joint credit card with their parents, but their parents where responsible for paying the bill. Now they are getting one on their own, they need to understand how it works and to pay their bills on time.”
Choi said if you do end up damaging your credit score, it is not the end of the world. You just don’t want to get to a point where you have accumulated so much credit debt that — along with student loans – you can’t get out of it. It can be easy to get multiple cards and rack up debt on all of them, he said.
“It can happen really fast, and the last thing you want is to be looking at a consumer proposal or bankruptcy, which can last for seven years on your credit profile and make it impossible to get a loan in the near future.
Prusko said one of the things many students and parents don’t know about are the opportunities to access student grants. He said most people are wary about getting provincial student loans in their first couple years of university, when they can use their savings, but many provinces also have grants that you can access when you apply for a loan.
He said that in Alberta, for example, there is a full-time student grant. If you can qualify for this grant — it is $2,100 a term, up to $6,300 per year. But, if they do not apply for a student loan, they can’t access that grant.
“On this application, you can also say, ‘Please don’t give me the loan, just give me the grant.’ People just don’t know this exists,” Prusko said.
Part of the work he does in his office on the U of A campus in Edmonton — and virtually online — is help students discover these grants. Some grants are given based on your program of study or to support certain communities, like LGBTQ2S+ or BIPOC students.
“Most of the applications are not difficult or hard to find,” he said. “Most schools will have a master list of grant applications, but it isn’t something that comes across students’ radars. They are just not thinking of finances or that they qualify, so they just do not bother.”
There are rough estimates, Prusko said, that tens of millions of dollars in grants that go unclaimed every year. Finding them, he said, is as easy as googling the name of your school and finances.
He warns though that if you are taking money from your RESP to pay for school, you may disqualify yourself for grants and scholarships. If you have $4,000 in it, you may want to use all in one year rather than, say, $1,000 each year, so you can access that funding.
“Parents should go through that and say here are a couple grant applications that my kid should think about and I need to make sure they think about them,” he said. “The average student we work with earns $3,000 they wouldn’t have received.
“A lot of students will work part time jobs, and it is a way better hourly rate to get a couple student discounts and get a couple grants. You will make far more money doing that then working through the semester,” he said. “That is the most compelling for students.”