The countdown is on to Costco trips for bulk KD, building Ikea desks, and parents' SUVs packed to the brim. Back-to-school is around the corner, and university students across the country will be saying bye to mom and dad and hello to independence. But as students dismiss their curfews, they're forced to take on new responsibilities like doing their own laundry and managing their finances. While this won't be new for all millennials, everyone can benefit from a study session on personal finance and tax tips.
Budgeting in the 21st Century
First things first, let's talk budgeting apps. How will you know whether your part-time job at the pub can support your weekly Yoga classes and Friday nights out? The days of recording your expenses in an Excel doc are over. Take advantage of budgeting apps like Mint and YNAB (You Need a Budget) and get your finances straight.
Max your tax return
It's never too early to start thinking about your taxes and there are simple things you can do as a student in order to maximize your tax return.
- Claim your tuition – Track down that T2202A form and claim your Tuition amount! Every student receives one and it outlines all the tuition fees you paid for the year. If you don't need to use the full amount of your credits this year, then you can either transfer the unused portion to a guardian, or carry it forward to claim the credits in future years. Sadly the Textbook and Education credits are no longer available federally, although they are still available in some provinces.
- Keep your receipts – Whether you stuff your receipts in an old shoebox, keep them in a file folder or save them on your laptop, it doesn't matter to us. Hang onto those receipts for moving expenses, medical expenses and charitable donations (including donations to your Alumni, recent Grads).
- Student loans interest – What's great about Canadian student loans are they are interest free while you are a student and as of recently, you don't have to start paying them back until you earn $25,000 or more per year. If you are starting to pay back your loans including that interest, you may be eligible to claim an amount for the interest paid next tax season.
RRSPs vs. TFSAs
For all you recent grads who are landing your first jobs in the workforce, don't forget about your new BFFs – RRSPs and TFSAs. While you might be tempted to spend all of your paycheque, you should be thinking longer term to ... gasp ... retirement! Registered Retirement Savings Plans (RRSPs) and Tax Free Savings Accounts (TFSAs) can help you save for the future – whether that's for a down payment on a house or retirement.
The main difference between the two is RRSPs are tax deductible whereas TFSAs are not. You can also withdraw funds from your TFSA without having to pay tax on them, whereas RRSP withdrawals are included in your taxable income. The Home buyers' plan allows you to borrow up to $25,000 in one year, tax free. But remember you are only borrowing it – you have two years before you have to start repaying it. Another thing to remember is that in order to contribute to an RRSP, you have to have earned income during the year and must file a tax return.
So, there you have it – your cram study session on managing personal finances as a student or recent grad. Study up and remember your exam is on April 30, 2018 when your Canadian income tax returns are due.