Spending and saving were hot topics of conversation last week when the federal budget was announced. But when it comes to personal budgets, young Canadians still don’t get it.
Every year, many students enter a new academic year at university without the slightest idea of what their financial needs are. Despite the shaky economic times, , students remain clueless about budgeting.
“I needed someone to sit me down and show me what a budget looked like, which was embarrassing and humbling,” says Christina Muehlberger, a graduate student in political economy at Carleton University. “I am financially illiterate, one hundred per cent.”
Muehlberger, who will continue on to complete her PhD next fall, learned how to budget during the first year of her graduate studies. “Last year was probably the first year that I had a steady income, so before that I always used the excuse that I had no money so what’s the point of even budgeting.” Muehlberger received money from her job as a teaching assistant at the university, a scholarship from her department and a student loan.
“I went nuts, but it didn’t seem like I was going nuts because I wasn’t buying anything big. I ate out for dinner every night, beers four times a week, clothes, I was so fashionable last year,” she laughs.
Before the grad student knew it, it was summer, she couldn’t find a job, and she had absolutely no savings. “I hadn’t gotten it into my head yet that just because I had money didn’t mean that I could afford things.”
According to Carla Hindman, Visa Canada’s director of financial education, the major challenge young people face today when trying to afford university, is that many have never learned how to make a budget. “I know that was the case when I started university, and I ran out of funds by Christmas that year.”
Practical Money Skills is a branch of Visa Canada that offers resources for students, parents and teachers on financial literacy. According to Hindman, a popular resource on their website is the budget calculator. “So people who’ve never learned how, can get some help to build their first budget.”
BUDGETING AND FINANCIAL NEEDS
Learning how to budget is essential, but Normand Seguin, director of financial aid and awards at the University of Ottawa, says understanding your personal financial needs is harder. He says most people don’t realize what their costs are.
“What is a financial need for you, is not the same for me, it’s not the same for our friends.”
Despite the fact financial counseling is offered year-round and on anything from budgeting to bursaries, Seguin says he only sees students in his office during a financial crisis.
“We might meet about, in a year, maybe 1000 people. It’s not a big volume but a lot of those students come in because they do not know where to go.”
At the University of Ottawa, financial counselors have the ability to dispense emergency bursaries and students can receive anywhere from $200 to $3,000, depending on their need and specific circumstance. Only in its third year, Seguin says this new program gives his counselors a budget of $250,000 a year to help students who are in a financial pickle.
Seguin says students lack financial organization at the university level largely because of a gap in financial education at the high school level. Students getting ready to enter their first year of university are often given large sums of money in the form of scholarships or student loans and are expected to understand how to manage their money.
“People spend their money as soon as they get their cheque,” Seguin says. “Kids are going out and they’re drinking their bursaries.”
Muehlberger agrees. She adds that a lack of financial literacy will haunt students when they start their professional careers. Students graduating with heaps of debt will need to tackle their loans if they ever want to be financially stable adults.
“Learning to budget is one of the fastest ways to do that.”