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Financial planning tips for students

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A post-secondary education is expensive – and very necessary these days. Most students must carefully manage limited financial resources to obtain that degree or diploma -- without accumulating a crushing burden of debt along the way.

That’s why students need a financial plan. Here are some practical strategies to help students manage money more effectively:

Live economically. Students may choose to live at home (and save money) or move out, perhaps to a different city or province. College and university costs can vary dramatically depending on the institution and province of study.

Budget realistically. Allocate financial resources to pay for the many expenses a student will encounter through the school years – fixed costs such as tuition, books, accommodation, transportation, and food, as well as variable expenses like entertainment. Assess against known resources (such as income from investments within an RESP, family contributions and personal savings) and expected income (from part-time or summer employment).

Tap into every income source. Before applying for a student loan, check for potential scholarships or bursaries from the school, foundations, religious groups, service clubs or civic groups.

Use credit wisely. Used responsibly, credit cards can be helpful in an emergency and for establishing a credit history.

Pay yourself first. By putting a little bit away each week, a student can begin to invest for the future, save for emergencies or for a major purchase.

Take full advantage of government tax relief for students:

  • Scholarships and bursaries are not taxable when the student is eligible for the Education Tax Credit.
  • Interest paid on a student loan is eligible for a federal non-refundable tax credit when the loan is part of a federal or provincial student loan program. Unused amounts of the credit can be carried forward and applied in any of the next five years.
  • Moving expenses are deductible when a student moves more than 40 kilometres to be closer to school or to a job. These expenses can only be deducted from the taxable part of your scholarships, fellowships, bursaries, certain prizes, and research grants.
  • Child care expenses may be claimed by the higher earning spouse/common-law partner of a lower-income student spouse as long as the lower income spouse is attending school and was enrolled in part-time or full-time educational program.
  • GST rebates must be applied for on the student’s tax return each year.

Other tax credits available to students:

  • Canada Employment Credit on the first $1,117 of employment income.
  • Tuition, Education and Textbook Credit. Unused portions can be transferred to a spouse, common-law partner, parent or grandparent, up to $5,000 minus the amount used by the student. Alternatively, unused amounts can be carried forward and must be claimed in the first year you have a tax payable.
  • Public Transit Pass Credit. Receipts and transit passes need to be kept in case the CRA asks you to verify your claim.

Talk to your professional advisor about the right financial planning strategies for your student.

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.

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