Student life is challenging. You juggle minimum-wage jobs with the pressure to maintain a decent grade point average. In addition, you’re forced to keep up with student loan payments and textbook purchases. With those priorities taking up much of your time, managing your savings—let alone setting aside money for savings—can seem low on your to-do list.
The fact is that establishing good savings habits as a student will put you ahead of the financial game for when you graduate and start your career. Having money in the bank as a student is an invaluable step forward for your finances, and the best time to start saving is right now.
Not sure where to begin? Use our student guide to saving to get started, and put yourself on the path to wealth and prosperity.
Start slowly
As a student, you’re faced with financial pressures every day. From paying for tuition to making ends meet on a student budget, the idea of setting money aside for savings might seem out of reach. That’s why you should begin slowly. Start by depositing just $50 per month into a high-interest savings account.
While $50 a month may not seem like much at first, if you deposit that amount into a high-interest savings account earning three per cent annually, you’ll graduate with about $2,544 in the bank after four years. That money could later serve as the beginning of an emergency fund or a down payment on a car.
By starting small, you’re establishing a savings baseline, and you can always increase your contributions later.
Pay yourself first
Most personal finance experts will tell you that the key to mastering the art of saving money is to pay yourself first. Here’s how it works: Every time you receive a paycheque from your part-time job, a student loan disbursement, money from tutoring, or another side hustle, keep a portion of that and save the rest.
It’s much easier to use the pay-yourself-first method than to try to live frugally, and put the money leftover at the end of the month into savings. Our brains are hardwired to spend everything we make, and paying yourself first takes away the temptation to spend your money instead of saving it.
Arm yourself with knowledge
What’s the difference between a tax-free savings account (TFSA) and a registered retirement savings plan (RRSP)? Should you save your money in a high-interest savings account, buy GICs, invest in mutual funds, or all of the above? What are your contribution limits?
If you want to be an expert saver and maximize the interest earned on the money you saved, you’ll need to familiarize yourself with these terms. Don’t worry—it’s not as daunting as it sounds.
If you’re just starting out, a high-interest TFSA account is a good place to begin. The TFSA is flexible, has a high contribution limit, and you can withdraw the funds at a moment’s notice with no penalties in case of an emergency. You also get your contribution room back the next year. You can check your exact contribution limit by logging into My Account on the Canada Revenue Agency website.
Align your savings with your priorities
It’s easiest to save money if you’re working towards a goal, so ask yourself: What do you want? Do you want to have money as a safety net in place while you search for a job after graduation? How about a down payment on a new car? What about a trip to Europe over the summer? A surefire way to become an expert saver is to set goals that align with your priorities.
Saving and investing might seem daunting, but it doesn’t need to be! Take your time, start slowly with a high-interest savings account and, as your nest egg grows, move on to more advanced methods of saving and investing. By following the steps we’ve provided, you’ll be a savings expert in no time!
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