Week 3: How Students Can Learn From Their First Big Financial Decision
Managing money for student life can be the student’s responsibility alone or for the student and parents together. But either way, a budget is critical. Equally critical is comparing income prospects to education costs.
Freedom vs. Finances
The additional expense of living away from home can also be significant. Living away or staying home and going to a local college or university is an important decision that needs to be taken with finances and not just desire in mind. Becoming independent of one’s parents just for the sake of independence, without consideration of the ramifications, can result in unmanageable debt. I am not saying don’t go away to college or university, but please consider the costs and weigh the pros and cons.
Back to the budget, create a document to work out the living cost, tuition, books and the fun money clearly and honestly. Put it all together on paper and understand what level of saving or financing is required to complete the education program. The earlier this is done, the more options that will be available and the lower annual expenses will be (or amount of financing required) to achieve the education goal.
Maximizing Every Parental Advantage You Can Get
If parents are able to assist in financing education, remember that savings and assistance can be provided both before, during, and after the education is completed.
- Before school starts, RESP’s can be used and the Canadian government will contribute 20% of everything you contribute to the plan (subject to annual limits of course). If you can save in advance, RESP’s can be highly effective.
- During the study years, Student loans are available for those who qualify and that can help finance the during education component.
- Then, if students need help to pay their student loans, parents can assist with those payments in the post-education period.
So, with planning, the length of time to pay for education can be incredibly long but student loans, for those who qualify, can help make finances the during education component manageable.
The prospective student should not be left out of the equation; students should work with their budget and understand it. Students should also put some “skin in the game” and work towards assisting with the funding of education or at least funding the “fun expenses” on their own.
Don’t make education cost something that causes stress. Be practical, think ahead, create a budget and make an informed decision.