Overrunning your budget is common among students regardless of their parent's incomes
TORONTO, Aug. 24, 2015 /CNW/ - With the new school year coming up fast, a new CIBC (TSX: CM) (NYSE: CM) poll finds that more than half (51 per cent) of post-secondary students tapped their parents for additional financial support while at school last year because they ran out of money.
Key findings of the poll include:
- 51 per cent of parents with children pursuing a post-secondary education say their children have asked for additional financial support or assistance last school year because they ran out of money.
- 86 per cent of parents believe they are good role models when it comes to financial planning.
"Some children are treating their parents as their personal ATM," says Sarah Widmeyer, Managing Director and Head of Wealth Advisory Services, CIBC. "But they need to understand that mom and dad may not always be willing or able to dispense extra cash. Teaching children basic financial and budgeting skills before they go off to college or university is essential."
"Clearly, being a good financial role model doesn't mean your children will understand how to manage their own finances," she adds. "That's why it is so important to teach them the importance of balancing a budget in their early teens because it's a much a tougher lesson to learn when they are off living on their own for the first time in their lives."
Having the talk: What parents can do to initiate the conversation
The poll results show that overrunning a budget is common with students from all financial backgrounds:
- Students from families with a household income of less than $75,000 demonstrated a similar lack of budgeting skills (52 per cent asked for money) as those from families with an above-average household income of more than $125,000 (48 per cent asked for money).
Ms. Widmeyer suggests parents be proactive and make time to discuss finances with their children. "It is important that children understand what happens if they run out of money or into other financial problems before they go off to school as opposed to after it happens."
Parents should make sure their children understand that there may be unforeseen events in life that result in financial challenges, adds Ms. Widmeyer. But they should also raise the expectation that if their kids do call in for more money, they should be prepared to share their expense tracking to demonstrate they can account for their spending.
"If your children ask you for more money, you should sit down with them and create a budget that shows how they plan to use the extra funds and how they plan to manage for the remainder of the school year."
A great way to ensure children grow up to be financially literate is to involve them in the family's financial matters early on. This could be planning a vacation budget, paying monthly bills, or reviewing a credit card statement together.
Off to school soon? Five tips for students to successfully manage their finances
For those students either starting or returning to school next month, Ms. Widmeyer offers advice on how to successfully manage their personal finances away from home:
- Distinguish between needs and wants: Are you spending your money on things you need - such as food and housing or tuition and textbooks - or on things you want - like pizza, beer, the latest smartphone or tickets to a concert? If your funds are limited, make sure you fully cover your necessary expenses first and prioritize your non-essential expenses.
- Draw a budget: Itemize your monthly expenses and add your total monthly income, including any loans, scholarships or money earned from part-time jobs. This will provide you with a clear picture of where your money is going. Make sure your budget is balanced by either reducing expenses or securing additional sources of income. Many financial institutions such as CIBC provide a free student budget calculator that will help you put together a budget.
- Manage your cash flow: Simply said - you cannot spend more than you have. Checking expenses against the amounts reserved in your budget and sticking to them will help you avoid overspending and getting into debt.
- Borrow responsibly: Using a credit card will give you more payment options and added financial flexibility. However, a credit card isn't free money and you should charge only what you can afford to pay back. Reduce your credit limit to a low level to keep yourself from spending money you don't have.
- Start building credit: Paying back bills, such as your credit card or cell phone bills, in a timely manner will help you establish a good credit history. A good credit history is important once you apply for any type of loan, such as a car loan or a mortgage.
"Starting school can be an exciting experience, but at times be daunting. Being responsible for your finances for the first time may add extra stress," says Ms. Widmeyer. "With some basic financial skills and a proper budget, students can manage their finances successfully and get a head start into their adult life."
Key Poll Findings:
Percentage of Canadian parents who have saved or are currently saving for their children's post-secondary education:
Percentage of Canadian parents who have been asked by their children for additional financial support last school year:
Household income of those who were asked for more money:
| Were asked
| Less than
| $50,000 to
| $75,000 to
| $100,000 to
| $125,000 or
Percentage of Canadian parents who consider themselves a good role model for their children when it comes to financial planning:
From August 13 to August 17, 2015, an online survey was conducted among 1,001 Canadian parents who are Angus Reid Forum panelists. The margin of error - which measures sampling variability - is +/- 3.1 per cent, 19 times out of 20. Discrepancies in or between totals are due to rounding.
CIBC is a leading Canadian-based global financial institution with 11 million personal banking and business clients. Through our three major business units - Retail and Business Banking, Wealth Management and Wholesale Banking - CIBC offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada with offices in the United States and around the world. You can find other news releases and information about CIBC on our corporate website at www.cibc.com/ca/media-centre/.
For further information:
Caroline Van Hasselt, Director, External Communications, at 416-784-6699 or
e-mail: [email protected]