Prepare yourself for the challenges of student life: be a smart financial consumer

November 18, 2019

By the Financial Consumer Agency of Canada’s Financial Literacy Month team

It’s the third week of Financial Literacy Month, and our theme this week is: Be a smart financial consumer. It also happens to be Education Savings Week, which is a great opportunity to address this topic with you, whether you are a student, a parent or a caregiver preparing for or helping your child prepare for post-secondary education.

The world of higher education is exciting – but also full of challenges, especially financial ones. It’s good to know your rights and responsibilities as a financial consumer as you plan for a post-secondary education.

In Canada, young people and their parents or caregivers enjoy many rights when it comes to their financial products and services. Along with those rights, you also have the responsibility to know about your obligations as depositors or borrowers.

Saving money for college or university is of course the first step to getting there. It can be hard to save, but parents and caregivers can access various forms of so-called “free money,” starting with the Registered Education Savings Plan (RESP). As soon as a child is born, parents or caregivers can set up an RESP in their name, and anyone can help contribute, including grandparents and friends. Once contributions start, parents and caregivers will be able to access the Canada Education Saving Grant, which is a matching contribution from the Government of Canada.

When students themselves are old enough to be preparing for college or university, they can also look for free money in the form of grants, scholarships and bursaries. They can apply for these through federal and provincial/territorial governments, as well as from colleges, universities and other institutions.

Once a student is ready to start post-secondary education, it’s important they know how to manage money and debt wisely, and live within their means. By learning good money management skills as a student, you will be far better prepared for life after school.

For students, knowing their rights and responsibilities when it comes to student loans and student credit cards is essential to avoiding excessive debt. It is important to read and understand the information from your financial institution before you agree to anything, and ask for clarification if you don’t understand something. Also, beware of signing up for a product that you weren’t planning on getting in the first place.   If you are not sure, sleep on it and see if you still want to sign up in the morning. 

It takes graduates an average of 10 years to pay off their student debt. So clearly, it helps if you know what you are getting into before you accept a student loan. Our website has useful information on paying back student debt, including tips on making a plan to repay, and what to do if you’re having trouble making payments.

As for credit cards, they can be a very expensive way to borrow money, especially if you only make minimum payments and incur interest. University and college campuses are popular advertising spots for credit card companies. The average annual interest rate for student credit cards in Canada is 18.11%. You can find credit cards with lower interest rates using FCAC’s Credit Card Comparison Tool.  It’s always best to pay your credit card bills in full and on time to maintain a good credit history. It will help you avoid interest charges. If you can’t pay them in full, it’s important to pay more than the minimum interest payment whenever you can for the same reason: avoiding interest payments.

One of the best things to do is to make a budget and stick to it. A budget is an effective tool that can help you manage, save and spend money wisely. The simple act of creating and following a budget can help put you on a path toward greater financial well-being. It will help you reduce stress, avoid excessive debt, and save for tomorrow.

Not sure where to start? FCAC has a free budgeting tool that can help you create a plan for your finances.

Above all, remember that getting ready for post-secondary education and greater independence should be exciting and fun!  If you know your rights and responsibilities as a financial consumer, plan carefully and live within your means, you will enjoy the experience, and finish school with more opportunities than obstacles.

Visit our Financial Literacy Month website and follow us on social media to learn more.

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