End-of-summer can be a bittersweet time for most students. For some, a slight feeling of dread will weigh on the season’s last moments of freedom. But not so for the university or college student-to-be. Of all the back-to-school moments in a student’s life, the pre-postsecondary jitters are definitely the most exciting.
Parents: how can you make sure your kids are fully prepared? While they’re busy planning the awesomeness of their year ahead, the excitement can make the realities of paying for their education harder to explain. It’s a good idea to plan the money talk wisely.
For most university or college students, paying for school is a shared responsibility. According to Maclean’s, the majority of parents (67 per cent) will contribute, to varying degrees, to their children’s education; the same goes for the majority of students (77 per cent). Parents and students need to be on the same page for things to go smoothly. If micromanaging your child’s expenses may lead to a relationship breakdown, giving them carte blanche could spell financial meltdown.
Here are 10 helpful tips for creating a constructive money talk with your soon-to-be university or college student.
As a parent, you should teach your child lessons about money throughout their lifetime starting at a young age. You can read our other blog for tips on how to have constructive money conversations with younger children. It is important to establish healthy and smart habits for spending, saving and managing money. Having these existing patterns will make it an easier transition into a post-secondary journey with financial freedom.
So your child has made it to university or college. Let’s take a moment to appreciate the magnitude of this life event. Emotions are likely running high. You may even be struggling with some fear of letting go. Your child is now a young adult who will become increasingly independent in the years to come. Give them the opportunity to contribute to the money talk.
Begin by scheduling a time when you can all sit down and have an open dialogue. “We’d like to talk about your living expenses for next year. Can we sit down tomorrow and go over some numbers?” It will give your child some time to prepare so that the money talk will be more of a conversation and less of a lecture. It will also allow you both to establish your expectations for the future in terms of money management.
In order to budget for the year ahead, parents and students need to have a clear understanding of what to expect.
With inflation causing rising prices across the board it comes as no surprise that attending post-secondary costs are also going up. For the 2022/2023 year undergraduate students paid an average of $6,834, according to Statistics Canada. That’s an increase of 2.6% from the previous year.
There are added costs for students living away from home for the first time too. Dorm rooms cost between $3,000 and $7,500 an average across the country. Living off campus can cost even more, with one survey finding students pay 25% more than the general population when living off campus.
And none of that even takes into account the seemingly ever-increasing food prices.
Breaking this down into monthly or weekly totals will help your child learn how to monitor spending and manage different types of expenses: extracurricular activities, daily travel, travelling home, books, food on campus, groceries, tuition, rent, etc. A budgeting app might be what your child needs for tracking spending. There are free ones, like Mint, that can help your child track their spending easily.
Next, move on to all the different types of student debt. If your child will be using credit to help pay for school, make sure you both understand how the borrowed funds will be allocated. As a rule, student debt is considered “good debt,” especially when it pays for essentials, like tuition, books, and basic living expenses. But it can quickly become “bad debt” if credit is funding a spring break vacation or nights out at the bar.
Also, ensure you both understand the repayment terms. With student loans from the government, repayment doesn’t need to happen until after graduation. But with lines of credit and credit cards, there will be monthly payments to cover interest charges. This is a great opportunity to show your child how to set up an automatic payment — why not one of your own? — through online banking.
Make this part of the discussion two-sided. Talk about the difference between needs and wants and the importance of reminding yourself — do I really need this? — before making any purchase. It can help if you share your own spending triggers. You can then discuss some areas of temptation your child will encounter at university or college: eating out, going to bars, clothes, Ubers, video games, etc.
Using cash or a prepaid credit card is still a great way of limiting spending, however, many budgeting apps (like Mint) will also send alerts when you reach a specific amount for set categories, like food and retail spending.
Students are often low on cash and that’s not always a bad thing. Many important life lessons are learned from surviving on a shoestring budget.
Many savings opportunities can be found by shopping strategically for groceries instead of buying food on campus.
This Maclean’s article talked to three students about their spending in 2023. On average they spent $1,299.65 in a single month. There are ways to trim that down though.
Is your child in need of some last-minute cooking lessons? Teach them how to make some of their favourite meals so they’re not reliant on eating out. It can also be a great bonding experience before they head off.
Another large expense with a thrifty hack is textbooks. According to Maclean’s the average student spends close to $800 per year on textbooks. Many students sell their used textbooks online for a reduced price though. All you have to do is make sure it’s the right edition and save yourself hundreds of dollars. For other purchases like clothing and everyday essentials, websites like Rakuten provide coupons and cashback to help you save money.
Convey to them that adopting frugal habits when you need to will come in handy later in life when your cash flow increases and you’re able to save.
Both scholarships and government aids can help. To get a substantial amount of money, it is recommended that a student applies for 40 to 50 scholarships. This will take time and effort but there is a wide variety of scholarships to fit any student's interests and desires. Furthermore, there are financial aids provided by the Canadian government specifically for students including grants, student loans and scholarships. There is also provincial-level support available in each province with varying funds based on your application results.
There are advantages and disadvantages to having a part-time job while in post-secondary school. You should talk to your child about whether this could be a beneficial option for them. There are many part-time jobs on or around college and university campuses that are available to students. Encouraging your child to get a part-time job while in post-secondary school can provide them with more than some additional spending money. A part-time job will also allow them to work on time management skills, build their resume experience and network with others.
Encourage your university or college kid-to-be to save for their future. Even if they don’t have much money to put away, every little bit helps. Explain to them that it’s the habit of saving that’s more important than the amount they’re saving. Putting a spare $20 into a savings account, like a TFSA, is a better money decision than spending it on junk food. Savings are also important for building an emergency fund when a surprise expense pushes you past your budget limit.
Your money talk should touch on the crucial difference between instant and delayed gratification. Use this opportunity to discuss what they really want. A new computer, a trip, a car? If they start saving now, chances are they will be able to afford something great in a year or two.
End the money talk on a positive note. Share their excitement by telling them about your experiences as a student, or during your first years of independence. What were the challenges you faced? What are the things you wished you did differently?
The goal for the money talk is to open the communication channels so that you can talk to each other throughout their student experience. Your child will go through some big changes in their first year of university or college. Celebrate those positive steps toward adulthood. Chances are they will still need you and rely on your advice when it comes to money.
The answer to this will depend on how much debt you have. If it’s a little debt, then it’s very possible you’ll be able to contribute money without any long-term consequences. It’s much trickier though if you know handing money to your child for school will put you in financial jeopardy.
Here’s some steps to take if you have debt and still want to help.
If you have debt and are falling behind there are options to help you become debt free. A Licensed Insolvency Trustee can help you assess your situation and may even be able to get your creditors to agree to lower the amount of money you owe. The first consultation with one of BDO’s Licensed Insolvency Trustees is free.