Here’s how to manage money well this school year

Here’s a quick lesson in how to manage money well this school year.

You do need a credit card, but use it mindfully … and pay it off

From buying groceries to paying for tuition or books to subscribing to Spotify to making online purchases. Having a student credit card is essential in building up a credit score and managing living expenses in our digital world.

But did you know that if you don’t clear the statement balance every 30 days, you’ll end up with credit card debt and pay some of the steepest interest charges out there between 19 and 22 per cent? Yikes!

You can easily avoid unnecessary credit card debt by limiting purchases to essentials only. And, to build a great credit score, pay your credit card on time and in full each month. If you miss payments, or simply can’t pay it back, you’ll get a poor score. A good credit score is over 600 points — so aim for that and it will take time to build.

I’m a big fan of limiting overspending temptation so I would recommend keeping the credit limit on your card to under $1,000 so that overspending isn’t even an option. And further reduce the temptation by having only one or two cards max!

You can track your credit score online through your bank, an app like CreditKarma or through one of Canada’s main credit bureaus — Equifax, TransUnion.

The most important financial skill every student needs to learn? Budgeting!

If you learn how to manage a tight budget while in school, you should be able to master budgeting for the rest of your life.

A budget is a plan for your money and it needs to be written out. I recommend you crack open a Google sheet and list out your expected income followed by expected expenses.

For income, this is generally coming from three sources as a student: a part-time job, money from parents or student loans.

For expenses, you’ll want to include your living expenses, cellphone bill, transit pass, groceries and other essential items.

When you subtract your expenses from your income, you’re aiming for a positive number. If it is negative, that means you’re spending more than you are bringing in and you’ll need to cut back.

Incorporate fun into your budget

You should enjoy this phase of your life!

Set a budget amount for fun, such as $150 per month. Having the money set aside should help prevent overspending. Spend your fun money however you want; parties, travel, meals and more. Get creative on how to stretch that money further by finding the least expensive ways to satisfy your social cravings.

When I was in university, for example, I used coupons, browsed flyers for the best deals on groceries, cashed in my rewards for personal care products and makeup, enjoyed happy hour specials, bought clothes second-hand and split meals with my friends. I always asked for student discounts and perks, and you should too.

From a money mindset perspective, try having fun hunting for deals by making it a game — the best deal wins.

Use technology to manage your money better

Those coupons and flyers I just mentioned; they’re online now. Couponing apps aggregate the best savings so that you don’t have to flip through paper flyers — yeah!

Tracking spending is super easy, too. Almost every financial institution in Canada has a notification system so you’ll receive a notification of all transactions going through your bank account. I love this because it brings awareness to your spending and you can check your spending against your budget to see if you’re on track.

Free budgeting apps can assist with tracking spending as well as setting up your budget (if you don’t want to use a basic template from Google). I like Mint and You Need a Budget.

Join free money groups on social media. You’ll learn money saving hacks, meet other students and get inspired to save money for the future.

Work and save when you can

Did you know students who work to pay for part or all of their schooling generally get better grades and are more likely to be hired after graduation? They also experience less student debt.

Whether it’s a summer job as a lifeguard or ongoing part-time bank teller work, I recommend getting in the habit of tucking away a percentage of each paycheque into a high interest savings account. Depending on your situation, this could range from 10 to 50 per cent of your earnings. This savings can go toward tuition, an exchange program, a new laptop or whatever else you need. Working hard (at school and at a job) and saving are core life skills that will set you up for financial success in the future.

Listen, you’re going to make mistakes with your money from time to time. But, it’s OK. Learn from them. Ask questions. And, whatever you do, limit your student debts to what’s absolutely essential. Your future self will thank you for it!

This article was originally published in The Star. Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star.