Student debt is a reality that many Canadian millennials endure in the pursuit of higher education. But according to a new study from BMO Wealth Management, as millennials transition from school to “real life” that student debt is what’s keeping them up at night.
According to the report Generation Why:
- The most recent data from the Canadian Federation of Students shows that on average Canadian millennials accumulated $27,000 in debt as students
- 29 per cent of Canadian millennials indicate that paying down debt is their greatest financial stress
- 19 per cent want to pay down debt before they save for retirement
- 41 per cent are focused on the short term goals and don’t consider long term financial goals a priority
- Real life situations are preventing millennials from gaining momentum with savings. 63 per cent feel that job security and/or lack of job opportunities are creating a barrier between their savings goals
“Investing in your education is meant to open doors to career opportunities. However, with the burden of student debt, you might be placing barriers in front of your financial goals,” says Jeff Schwartz, executive director, Consolidated Credit Counseling Services of Canada.
“It’s an excellent idea to focus on paying down your student debt as soon as possible, but you shouldn’t subscribe to an all-or-nothing financial strategy. Map out a financial plan that includes aggressive debt repayment, but also addresses short and long term savings,” says Schwartz.
Here are some tips on how to attack your student debt and move towards your financial goals at the same time.
If you are still in school…
The best way to reduce your student debt load is by minimizing the amount of debt that you take out in the first place. Look for ways to cut costs, like living at home, buying your books and supplies used and working part time during school to keep your cash flow going.
It’s simple. The less debt you have to pay back, the faster you’ll be able to move ahead towards other financial goals.
Congrats! You’ve landed a job and you are set to climb the career ladder. As you map your course to success, take a similar approach to your finances.
Start by setting a detailed household budget, with as much as you can directed towards paying down debt, after you’ve met living expenses and savings.
Diversify your savings
But I just started working? Why would I even think about retirement? Even though your retirement may be far away, good financial planning incorporates savings goals that address your short, medium and long term plans.
You need to have emergency savings on hand in cash, so that you don’t have to turn to debt to cover costs. You can also start contributing to an RRSP so that your retirement savings can begin to grow. Your retirement savings can actually do double duty to help you reach some of your medium term financial goals. You can withdraw funds from your RRSP to use as a down payment for your first home.
Don’t be daunted by some of the real life challenges when you are beginning a new job after graduation and trying to juggle financial responsibilities as well. With proper budgeting, you will be able to pay down your debt and save at the same time.
Are you looking for ways to reduce your debt load? We can help. Call one of our trained credit counsellors at or check out our online debt analysis.