Undergrads Budgets Did not Make The Grade
By A Correspondent
TD Canada Trust offers freshmen advice on how to lock down an “A” in money management
Student debt can quickly escalate in a number of different ways, like dipping into the semester’s food budget for a Spring Break vacation or withdrawing cash from a credit card to pay the rent. According to research from TD Canada Trust, 38% of undergraduate students wished they had stuck to a budget during school, and 43% said they wished they had curbed spending on discretionary items like nights out with friends, gadgets and coffee. Quick-fix approaches to spending can have implications that linger for decades, so it is essential that freshman put their best financial foot forward from day one.
“University is full of tempting opportunities to spend money, which is why it is so important for students to create a budget and learn when and how to say ‘no’ to things they cannot afford,” said Raymond Chun, a senior vice president at TD Canada Trust. “With the average cost of an undergraduate degree currently estimated at $84,000, it is imperative that students do their homework on how to manage everyday finances, stretch their student dollars and avoid excessive debt.”
To help post-secondary students make the grade in money management, Chun provides advice on how to avoid the top three freshman fiscal missteps:
- 1. Earning a failing mark on a credit rating
It can be challenging to juggle studies, extracurricular activities and social engagements with keeping track of financial obligations, like paying bills on time. A missed payment could have a negative impact on a credit rating, impacting the ability to borrow money to buy a car or a home in the future.
“Always pay bills on time and in full and consider setting up automatic bill payments online for regular expenses,” said Chun. “Remember, even if a cell phone provider gives you an extension on a bill, your credit rating may still show that it was paid late.”
- 2. Treating a credit card like a debit card
Nearly one-third of students (31%) wished they had used their credit card more responsibly at school. A credit card is a practical tool to purchase books and school supplies. It can even provide you with the opportunity to save money by offering additional benefits like no annual fee, the ability to earn rewards and insurance coverages. Still, Chun warns students to only use credit cards if they are sure that they can pay off the balance in full when the monthly statement arrives.
“Credit cards essentially offer customers an interest-free loan on new purchases for 21 days, but only if the balance is paid in full by the payment due date,” Chun said. “If payment of the full amount is made even one day later, the cardholder will be charged interest on those purchases from the day they were posted to the account.”
Although tempting, making a cash advance from your credit card account is not always a good idea since it incurs interest from the moment the transaction is complete.
- 3. Spending without a plan
Studying away from home is full of tempting opportunities and too much discretionary spending can derail even the best budget intentions. To get a clear picture of how flexible the budget is, list the money coming in from scholarships, work, family and student loans. Then, subtract essential expenses like tuition fees, books and living expenses. If the balance is negative, rethink unessential expenses or look for alternative funding options for school.
“One of the easiest ways to avoid overspending is to organize your finances,” said Chun. “Take advantage of past online statements to assess current spending habits. That history can help identify potential saving opportunities and build a realistic budget you can stick to.”
About the TD Canada Trust Back to School Poll
TD Bank Group commissioned Environics Research Group (www.environics.ca) to conduct an online custom survey of 1,388 Canadians aged 18 years and older who have any post-secondary education, including 798 who are currently completing undergraduate studies or have attended in the past 3 years. Responses were collected between January 10 and 25, 2013.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million customers. We provide a wide range of products and services from chequing and savings accounts, to credit cards, mortgages and business banking, to credit protection and travel medical insurance, as well as advice on managing everyday finances. TD Canada Trust makes banking comfortable with award-winning service and convenience through 24/7 mobile, internet, telephone and ATM banking, as well as in over 1,100 branches, with convenient hours to serve customers better. For more information, please visit: www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank Group, the sixth largest bank in North America.