It is summer time and students everywhere are taking a break from school to focus on more hands-on activities, like a summer job.
Although many students are using their summer time earnings to save for school-related expenses, a survey from TD Bank shows that some students are relying on student debt to fund their education. As a result, many students are using their summer job earnings to help achieve some other financial goals.
The survey also found a generational divide, with students today relying more on debt to fund their education over their parent’s generation. According to the survey, the top reasons that students were working a paid summer job were:
- Put money in savings (46.9 per cent)
- Travel (25.3 per cent)
- Pay down debt (20 per cent)
- Put money in RRSP, TFSA, etc. (12.9 per cent)
- Save for a big ticket item, like a car (15.8 per cent)
- Save for a house down payment (12.7 per cent)
- Today, 35 per cent of students rely on debt vs. 28 per cent from their parent’s generation.
“While it is commendable to work towards short, medium and long term financial goals, there is a trend with many students to turn to debt to finance their education says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“The less debt you are responsible for when you graduate, the more cash flow you’ll have. You’ll be able to achieve these other goals more quickly once you’re out of school, says Schwartz.”
Set a budget
There is no time like the present to start good financial management practices, and that includes setting up a functioning budget.
Make sure that your budget items include any costs you might incur on a monthly basis (rent, food, transportation and spending money). Set a goal for what you think you’ll need for school in order to remove or limit your need for credit during the year.
If you’ve got room left over, then by all means direct some of your earnings towards other goals that you’ve identified. This is a valuable personal finance lesson as you move along your life’s path- that it is not only possible, but important to have multiple financial goals (i.e. saving and paying down debt at the same time).
Don’t use the credit net
With the growing appetite for students towards credit, the temptation is to put your credit card in place over the school year to catch any extra spending you may not have accounted for.
This could quickly translate into a snowball of debt, growing with interest that could quickly stretch you beyond your means. Make sure you’ve got a healthy cash cushion.
Keep your job year round
One way to avoid the credit trap while you’re in school is to keep your summer job all year long. Even a few hours a week can really help contribute to your cash flow and keep debt loads manageable.
Is student debt dragging you down? Do you wonder how you can address multiple financial goals at once, like saving and being aggressive with your debt? We can help. Contact one of our trained credit counsellors at 1-888-294-3130 or visit our free online debt analysis.