7 finance and budgeting skills every student should know
Taking the time to learn basic finance and budgeting skills before finishing college or university helps you prepare for school and beyond. Here's what to know.
Taking the time to master all things money while you're in college or university may seem like a low priority.
In reality, doing so may be crucial to success as a student. Plus, every decision you make now has a ripple-effect years into the future. A little financial preparedness before you start school could be the difference between graduating with a small amount of manageable debt and being stuck paying off your student loans until you're 30 or older.
Here are seven important finance and budgeting skills every college or university student should know.
1. How to track your spending
Tracking your spending is one of the most basic financial skills. It's also one that surprisingly few Canadians have a solid handle on.
Laying out exactly where, when, and how much you spend is the only way to get a clear financial picture of where your money is going. It also helps you determine whether you're using every dollar to its best potential. Track your spending with a pen and paper, a spreadsheet, or an app.
2. How to make a budget
Once you know where your money is going, learn how to budget so that you can make more thoughtful decisions about where it should go.
Build a budget that accounts for necessities but that also incorporates fun activities like restaurants and entertainment. If you're planning to finance your education with loans, gaining budgeting skills will help you manage your instalment payments so you don't run out of money before the end of the semester.
3. How to write a cheque
Cheques may seem antiquated, but you'd be surprised how many landlords still require them. Knowing how to write a cheque will help you avoid unnecessary fees, even if only on rent day. Here's an excellent primer on how to write a cheque.
4. How interest works
Interest is part of everyday financial management, and it can either be a powerful tool or a disastrous liability. Interest is essentially the cost of using someone else's money. When you borrow money, as you do with a student loan or a credit card, you pay interest. When you lend money, like when you have a savings account or GIC at a bank, you earn interest.
It's easy to pay hundreds of dollars per month in interest charges with a maxed-out credit card or hefty student loans, so keep interest from working against you by avoiding debt whenever possible. On the flip side, the more money you save, the more interest you'll earn and the further ahead you'll be financially. Use a simple interest calculator to help you understand the ramifications of taking on debt or saving money.
5. How to DIY your taxes
Taxes are a traditionally scary topic, but they don't need to be. Learning to do your taxes as a student, when your money situation is relatively straightforward, is an excellent way to become used to the process before life gets in the way and complicates things. Most DIY tax software options offer a free alternative for students.
6. How to check your credit score
Your credit score is a numerical representation of how comfortable lenders should be trusting you with their money. However, some landlords and employers also use it to determine if you might be a trustworthy tenant or employee. The better you handle your finances, the higher your credit score will be.
7. How to choose the right financial tools
As a student, you'll need better financial tools on your side than the bank account your parents signed you up for when you were 8. To keep your money organized at university and beyond, upgrade to a chequing account for daily purchases, a savings account for money meant to be spent later, and a credit card for online purchases and booking travel.
You can opt to shop around and open accounts at different financial institutions or choose an all-in-one package, which may net you discounts on fees. Whatever you pick, it's important to be frank with yourself about your spending needs. If you plan to use a credit card only for online shopping and emergencies, don't choose a rewards credit card with a $150 annual fee. You probably won't earn enough in rewards to offset the cost. (Shameless plug: our no-fee credit card gives you great cash back rewards, travel insurance, and purchase protection!)
Life as a college or university student can be hectic and overwhelming, but it's the wrong time to let your money management fall by the wayside. Fortunately, all you need to do is run down this simple list to master basic money skills and set yourself up for financial success before classes begin and long after they end.
The length of your credit history matters, so keep your oldest credit tool active, even if you don't use it. That might be a student credit card with a $500 limit or an old department store card. Whatever it is, keep it open and in good standing.