4 Money Tips for Students

Before you start classes, and after the summer we’ve had, take a minute to prepare for what you can

Andrew Willis 4 September, 2020 | 1:29AM

Colourized four leaf clovers

Students around the world are coming out of one of the worst summers they’ve had in the while. Too much Netflix, too many family Zoom calls, and awkward house parties didn’t help with the lack of summer work. But that doesn’t mean you can’t come out of this summer smarter and better equipped – especially when it comes to your money!

Morningstar’s Director of Personal Finance, Christine Benz, emphasizes the importance of building flexibility into your plan. “That means having an emergency fund, mainly, but also staying financially flexible--for example, being willing to move to a cheaper housing situation or make other lifestyle adjustments so that some sort of an income or spending shock doesn't permanently derail your plan.”

With the right financial and mental flexibility, you’ll be both stronger and better able to find new paths to success.

Tip 1: Look for Silver Linings in Change
The pandemic uprooted everything, but society’s replanting itself. The crisis has been seen as a wide-reaching “trend accelerator”, and served as one of those rare collective lessons for the world where we’re all grasping for good news and inevitably becoming better at finding opportunities in problems.

Ask yourself, how have social norms and consumer habits changed? Did any careers become more appealing to you? Do you think those changes will last? Take inventory of the skills and resources you used this time: Where did you find your most reliable information? Did anyone help you? Why did they help you? What were the most rewarding things you did this summer?

Giving yourself this quick pop quiz now prepares you in the short term for a school environment full of opportunity, and even moreso if you’re taking a leap year.

Tip 2: Don’t Be Shy About Asking for Help
The good news is we’ve all probably sought some sort of support recently, whether it was related to our finances, work schedules, work locations, physical or mental health. Now might be the least awkward time to address obstacles to your success.

“There are many programs that are designed to help students financially,” says Nicholas Hui, CFP with Vave Financial Planning. Do some research into available grants, bursaries, or loans to help ease the burden financially, but consider asking other students and sharing knowledge about the various programs out there."

Start with your student finance office. Many colleges and universities stepped up to coordinate impressive fundraising campaigns at the start of the crisis and they may have new scholarships or funds coming online. Also, be sure to check at the faculty level for support for specific programs. It’s motivating and highly efficient to start your search with like-minded people in a similar situation.

Tip 3: Human Capital for Students
Reaching our financial goals involves time and money. And the value of your time right now may be greater than what you have in cash.

Like Benz recently said on Twitter:

Christine Benz tweet

One of the best investments students will ever make is in their own human capital--their lifetime earnings power,” says Benz. “And just like investing in the market, the earlier they make additional investments in human capital and additional education, the more it's likely to pay off.”

Education is great, qualifications are important, but work experience also grows human capital. If you’re taking some time off school, consider that your school will also value your time at work. “Indeed, many MBA programs and law schools even require enrollees to get some work experience under their belts before enrolling in their programs,” adds Benz.

When you go to a bank for a student loan, especially for professional studies, they’re making a judgement on your human capital. Do they care that your bank account can barely handle a case of beer? A little, but they know your time at school will be worth it and so should you, so don’t fear student debt.

“Student loans should be thought of as an investment in your future,” says Chris Ryan, CFP with Ryan Lamontagne Inc. “It is a ‘good debt’ that will allow you to get a better, higher-paying job than if you didn’t have an education. That higher income is your return on the investment.”

Tip 4: Sweat the Small Stuff – A Little
Be sure to keep track of the little ‘good’ things that add up quickly as well. Your credit cards should be no fee and cash back if you’re on a starting salary (reward ‘points’ make you wait and lead to things you don’t need). And you should have the habit of looking for a student discount or coupon code on anything you buy, especially online.

“During this time, a lot of students are learning how to manage their own finances for the first time while also facing temptation to spend money from all directions,” says Ryan. “A great mental trick I used personally as a student when I was trying to decide on a lifestyle or discretionary type purchase was to convert the cost of the purchase into my hourly wage at my part-time job.”

Ordering from Amazon is very easy, but does it make up for the effort you put into that money? Or would you rather go to the dollar store, borrow a book from the library, and watch Youtube with a couple of ads in exchange for skipping an entire shift? It’s a real trade!

Another way to manage spending is by setting limits. “Help reduce the temptation of racking up a big balance by keeping your credit card limit low,” says Ryan. “Limits of $1,000-$2,000 should be enough for most everyday use. For bigger ticket items over your limit, you can actually pre-pay or “over-pay” your credit card before putting the charge through.”

Other ways to control spending are by fixing any long-term drains on your finances. Use a no-fee bank if you can, and consider cellphone and internet plans from smaller companies with often equally reliable service at a much lower rate.

Lastly, don’t forget the little benefits from those silver linings! "One of the expenses that can really add up for students is eating out and buying drinks,” says Hui. “With most schools moving to e-learning, this is a great opportunity to try cooking at home and developing healthy habits.” Perhaps you’ve developed new cooking skills that can save you from paying for takeout? Just make sure your roommates agree to do the dishes.

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Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca

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