Back-to-school discussions often focus on younger children and high school students. However, the move to post-secondary education can present a different set of challenges for both students and their parents. For the first time, a young person may be living away from home and expected to manage many aspects of daily life independently. Families often focus on how to pay for tuition, textbooks, technology and clothing, as well as finding a place for the student to live. These are important considerations, but so is making sure that a young person leaving home for the first time has the basic skills needed to manage money independently.
Recently, friends of mine returned to Canada after living overseas working for the Canadian government for over 12 years. Their 18-year-old son will be attending university in a different Canadian city while his parents settle in Ottawa. Along with opening him a Canadian bank account, the family sat down together to prepare his first realistic monthly budget.
They used a bank budgeting app to estimate what he would need for groceries, transportation, clothing, restaurants and other personal expenses. Because the family had been away from Canada for so long—and because their son had never purchased groceries independently—they even visited a grocery store together to see what food actually costs.
It was an eye-opening exercise for everyone.
A budget should reflect real life
A student budget needs to include more than tuition and rent. Depending on the student’s circumstances, it may also need to account for groceries and restaurant meals, transportation, cellphone, textbooks, clothing, entertainment, prescriptions or dental expenses and costs to travel home during school breaks.
It is also helpful to distinguish between fixed expenses, such as rent and a cellphone plan, and variable expenses, such as food and entertainment. This helps students understand which expenses can be reduced if money becomes tight.
Parents may be able to help financially, but that does not eliminate the need for a budget. In fact, financial support can be more effective when both the parent and student understand how much will be provided, what it is intended to cover and what the student will be expected to pay personally.
Introducing credit cards and financial commitments carefully
For many students, leaving home also means their first experience with credit. A credit card can help establish a credit history and may be useful for emergencies, but it should not be treated as additional income.
Depending on the student's age and habits, a family may want to begin with a low-limit card or a shared arrangement that allows the parent and student to review spending together. The aim is to begin creating a credit history while identifying problems before they become unmanageable. The right approach will depend on the student: one young person may be inclined to overspend, while another may spend too little on necessities because they are anxious about running out of money.
Students should understand that a credit-card balance should ideally be paid in full each month. Paying only the minimum can turn relatively small purchases into long-term debt. They should also know who is legally responsible for the account, particularly where a parent has co-signed or provided a supplementary card.
Credit cards are not the only concern. Gym memberships, cellphone contracts, streaming platforms, gaming services and other apps may renew automatically or be difficult to cancel. A modest monthly charge can add up quickly when several subscriptions are operating at once. Reviewing bank and credit-card statements each month helps students spot forgotten subscriptions, unexpected fees and possible fraudulent transactions.
Education debt still requires a repayment plan
Student loans are often described as "good debt" because education will hopefully improve a person's long-term employment and earning opportunities. However, even worthwhile debt must eventually be repaid. Before borrowing, students should consider what their likely loan payment will be after graduation and how that payment may fit within an entry-level salary.
Student-loan debt also receives special treatment under Canada’s insolvency laws. Generally, government student loans are not released through bankruptcy or a consumer proposal if the student ceased being a full- or part-time student less than seven years before filing. In some cases, a court may reduce that period to five years where specific hardship requirements are met. This makes it especially important to borrow thoughtfully.
Part-time and summer employment can reduce the amount a student needs to borrow while teaching responsibility, time management and the connection between hours worked and the cost of a purchase. Even if a student cannot pay tuition independently, contributing toward groceries, transportation, clothing or entertainment can make a meaningful difference.
The appropriate balance will be different for every student, and work should not undermine the student's health or ability to succeed academically. Full-time studies are not the only acceptable path, however. For some students, studying part-time while working may be a practical way to complete an education with more work experience and less debt.
Before choosing that route, students should examine how part-time studies may affect tuition, scholarships, bursaries, student-aid eligibility and the timing of student-loan repayment. They should also look into co-op or other work-integrated learning programs that may provide income, practical experience and employment connections while they complete their education.
Financial education can begin in high school
When I was in Grade 9, my father gave me $100 in September and told me it was the last money he would provide for clothing that school year. I was expected to make it last. Of course, this was a long time ago - when dinosaurs walked the earth - and $100 went considerably further than it does today. Nevertheless, the lesson stayed with me.
Some parents use a similar approach with today's high-school students, particularly as their children become more fashion-conscious and begin earning money. They provide a set amount for the school year to cover agreed costs, which may include school supplies and clothing. Giving students responsibility for a defined amount encourages them to make good financial choices and provides independence within clear, manageable boundaries.
For families already struggling with the cost of living, the budget may be modest and focused on essentials. Reusing what is still serviceable, shopping second-hand, seeking available school or community assistance and deciding which purchases must wait are also financial lessons. Young people can be included in age-appropriate discussions about these choices without being made to feel responsible for solving the family's financial problems.
Practical experience matters
Like it or not, credit and debt are part of modern life. Preparing young people for high school, post-secondary education or the workforce should include practical financial training and continuing guidance. Without much forethought, a young person can quickly become trapped by credit-card balances, student loans, subscriptions or other commitments they did not fully understand.
As parents, we cannot make every decision for our children - and really, we should not. We can, however, help them learn to budget, earn and manage their own money, use credit carefully, ask questions before signing contracts and recognize financial trouble early. A little guidance and practical experience at the beginning may help prevent a much more serious financial problem later.