University students underprepared to manage budgets, debt expert

VANCOUVER (NEWS 1130) – University students are getting a failing grade at budgeting, but a debt expert says there are some simple ways they can pass the class.

A recent poll by Capital One Canada Financial Education found 46 per cent of Canadians – and 50 per cent of 18 to 25 year olds – feel they’re unprepared to manage their finances going into post-secondary.

Accounting firm BDO’s vice president and debt expert Donna Mihalcheon says the habits usually start at home with kids watching parents and then continue when students don’t learn how to budget in school.

“A lot of the parents are probably using credit cards or not budgeting… and at school, we don’t really teach financial management,” she says.

Mihalcheon says their data shows that in 2013, 85 per cent of students had one credit card with debt by the time they graduated and 29 per cent had two or more cards with debt.

And while 58 per cent of students agree talking about finances with friends, family and professionals is the best way to learn about how to best manage their money, they also say they’re uncomfortable talking about their finances.

“I think we’re teaching things backwards today. We don’t teach them to save for things and then buy. We create the purchase and then we figure out how we’re going to pay for it,” Mihalcheon says, adding parents should teach their kids about money management before giving them a debt or credit card or anything that results in a bill at the end of the month.

She advises new students to sit down, work out a budget and monitor it weekly to see just how much money is coming in and going out and catch spending problems before the spiral out of control.

“What’s available to spend, what are my costs going to be, what’s priority, do I need it or do I want it?” she suggests.

She also encourages students to check their bank statements to make sure they’re accurate and pay off their entire credit card at the end of the month, rather than just the minimum, to avoid graduating with more than just student loans.

“If you cannot pay off the full balance, absolutely each and every month, you should cut up the credit card,” she says.

Top Stories

Top Stories

Most Watched Today