Building a financial future for post-secondary students

By Scott Sanders

We’re past the mid-way point of the summer and soon many recent high school graduates will be starting their post-secondary education. The transition from high school brings a change in financial priorities, but often many young people are unprepared for their new financial reality. It’s common to hear stories about freshmen spending like it’s Christmas in September. Savings soon suffer and many students find themselves (again) with little money left at the end of the month for groceries, rent or other necessities.

For parents reading this, the final weeks before school starts are a good time to talk to your soon-to-be-post-secondary child about some simple strategies to preserving savings and building for the future.

First, ensure your child sets aside a rainy day fund. This is important for anyone no matter their stage in life, but is crucial for people with limited income and mounting bills. Once you have created the fund, it’s strictly hands-off. As the name implies, it’s to be used to respond to life’s big surprises, such as car repairs or to get back home in an emergency. Consider it nuclear.

To preserve the emergency fund, it’s important to create a simple budget. It can be as easy as tracking spending on a piece of paper or an Excel spread sheet. For the mobile crowd, many apps allow users to add bank accounts and monitor transactions at the point of sale to help one better understand spending patterns. The best part is many of these smart tools are free.

From the budget, analyze your spending. Once you start tracking where your money goes, you can begin making better decisions about where it should not be heading. Cut down on discretionary spending. Eliminating your daily coffee purchases can save hundreds, even thousands of dollars a year depending on your level of java sophistication. Also, monitor your smartphone use and find a plan that best suits your needs.

To further save, encourage the use of freebies and discounts. I’m not suggesting anyone become a professional dumpster diver, but be open to opportunities to trade or borrow versus buy. You’d be amazed at the finds students want to part with. Some internet sites like Kijiji or eBay are smart choices for discounted, and sometimes free items. Many colleges and universities offer subsidized services, such as gyms and fitness facilities, making the decision to forego an expensive gym membership a no-brainer.

Better yet, going for a run in the park is even easier on the wallet and mind. When shopping for electronics, such as a new computer, make a list of your needs and only purchase the one that meets your qualifications.

The post-secondary phase of life is also a time many young people get their first credit card.

A credit card is an important tool in one’s financial future because it establishes a credit history, which can help build a strong credit score. A credit score is a number between 300 and 900 that shows banks and other lenders how financially responsible a person is.

Does your child want to buy a car or get a loan? A good credit score, about 750 and above, could help them secure a lower interest rate than someone else with a lower score. On the other hand, a bad credit score may even disqualify your child from getting certain jobs that require handling money or renting an apartment.

A credit card is not free money, a common sentiment I hear. Make sure your son or daughter is aware of their credit limit and that they use only a portion of the limit. When used responsibly a credit card can help manage cash flow and accumulate loyalty points or cash for freebees.

As parents, we need to begin teaching financial lessons much earlier in life, say in the tween years or even earlier. But it’s never too late to start and the transition to from high school provides an excellent time to start.

Scott Sanders is the Director of Card Solutions with Alberta-based Bridgewater Bank.

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