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How to Budget For University

05/30/2014 06:18 EDT | Updated 07/30/2014 05:59 EDT
Tooga via Getty Images

By now, most students planning to start college or university in the fall are beginning to think seriously about what needs to be done before their classes start. This includes everything from signing up for courses, purchasing text books, getting supplies, and then figuring out how to pay for it all. Post-secondary education comes with a number of additional costs and responsibilities that will be new to many first year students. And, it will be the first time that many of them will be managing a portion or all of their day-to-day expenses while studying.

So how do we help students prepare for the coming year? A good starting point would be by taking some time now to review and discuss the following questions:

  • What expenses will you have for the year? -- Regardless of whether living in residence, off-campus or staying at home, there are now a number of new expenses that didn't come into play during high school. Research to determine the exact cost of tuition, residence/rent and transportation. Then consider the cost of textbooks for the year, groceries and toiletries for those living away from home, phone and internet bills and the all-important discretionary spending. Make sure this last item is realistic by basing it on today's spending behaviour. Reviewing past bank and/or credit card statements is a good place to start.

  • How much do you have in savings? -- This includes any personal savings being put toward school and any investments, such as Registered Education Savings Plans (RESPs). When it comes to accessing the funds in an RESP, it is important to understand what is available and how to withdraw the funds. RESP funds are split into two categories, Post-Secondary Education Payments (PSEs) and Educational Assistance Payments (EAPs). PSEs are comprised of contributions to the RESP, typically from parents. This money is treated differently from a tax perspective than EAPs which are made up of grants from the government in addition to investment growth. Withdrawals from PSEs and EAPs are treated differently from a taxation perspective. Work with your bank or financial advisor to get the maximum benefit from RESPs.
  • Have you explored additional sources of funding? -- There is nothing better than money that does not have to be repaid. Investigate all grants, scholarships and bursaries that may be available. Today this is easier than ever. And not all scholarships are based on academic achievements. There are websites that consolidate scholarship information including www.studentawards.com. And many colleges and universities offer scholarships based on grades in the final year of high school. See what the new school has to offer and find out if how to qualify.
  • What does a realistic budget look like? -- Creating a budget is a tried-and-true way to manage finances and stay on track throughout the year. The key to success is making it realistic. If the budget is too tight, it will be difficult to stick to it. Leave a little wiggle room. Budgeting isn't about sacrifice -- it's about trade-offs. Keep what is truly important and consider removing the things that aren't so important.
  • Is there a shortfall in your budget? -- Once the budget is complete, it will be easy to see if there is a shortage of funds for the coming year. For students, there are a number of options available to fill this gap. It is quite common for students to borrow or receive some additional funds from family. And for many, government loans are another possible option, as are part time jobs. Finally, it's important to know that banks and other financial institutions will provide financing to students pursuing post-secondary education, usually in the form of a line of credit. Students typically receive favourable interest rates, make interest-only payments while in school and receive a one year grace period upon graduation. That gives the new graduates some time and breathing space to get established before repayment starts. Ask the bank for further information and details about options for post-secondary financing gaps.

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