Back to School: Useful tips, traps to avoid

Back to school shopping season is now upon us, and while that can be fun, it can also present some unnecessarily big expenses for parents and students.

There are many financial risks to consider, especially for those going out of town to attend college or university (not to mention their parents).

“Back to school is pretty interesting,” said Matthew Keenan, Credit Counselling Service of Sault Ste Marie and District credit counsellor, speaking to SooToday. 

“It’s the second busiest shopping season of the year (second only to the Christmas season) so with that comes a lot of money being spent.”

“Research shows an increase of four-and-a-half percent in back to school spending over last year, that’s about $200 per child or youth, so when you have two kids, for example, that’s a minimum of $400 in back to school shopping,” Keenan said.

That is due to a combination of rising prices (which is, for the most part, beyond our control) and excessive use of credit cards for back to school purchases, Keenan said.

“Some parents are more likely to overdo it with their credit cards because there is a relatively low interest rate compared to the past.”

“We have to know where to spend, where to save, where to be thrifty, and where being thrifty actually costs more money in the long-term,” Keenan said.

“First and foremost, have a budget in mind.”

Keenan advises parents to be extra mindful of what their children actually need to go back to school with in regard to school supplies.

“Make an inventory of what your child already has.  There’s no point  in buying new pencil crayons or a new lunch bag if if they already have those things from last year…some parents do duplicate on smaller things like that, and a lot of small expenses add up.”

What about clothing?

“That’s another one of those interesting points,” Keenan said.

“Make sure you’re looking at buying sturdier fabrics if you have a kid who likes to run around a lot and get dirty, buy harder fabric pants like jeans instead of track pants.”

“A lot of the new, super cheap, fast fashion that’s out there that kids are often drawn to, where are they made and what are they made of?”

“You can end up buying a pair of pants, wash them three times and they don’t fit anymore, or they fall apart on you,” Keenan said.

“Clothes don’t have to be brand new either, definitely go shop at Value Village or take part in online auctions if you want.”

Also, a lot of back to school spending is on technology.

That is one area, Keenan said, where parents must step in and say ‘you can’t always get what you want.’

“Technology costs keep going up, and does the child need a tablet, a cell phone and a laptop, do they need all three?”

Back to school shopping season can be a great learning opportunity to show children and youth how to spend money, Keenan said.

“A lot of kids are only present at the point of purchase, they only see their parents paying for something, they don’t see the budgeting, the making of the list or paying the bill at the end of the day, so it’s a great opportunity to discuss this and say ‘if we get this pair of shoes, we can’t get that pair of pants.’”

“For older kids in high school who might have a part-time job or summer job, parents can come up with an agreement with them and say we’re willing to spend $200 on back to school and we need to get these 10 items, why don’t you share the cost with us, or if you want something more expensive why don’t you spend your own money on it?”

“It definitely teaches kids the value of money.”

“It’s surprising how quickly that pair of pants they really wanted is no longer such a big draw when it’s their own dollars at the end of the day,” Keenan chuckled.

What of bigger kids starting college or university out of town?

“That’s a big one, it can be pretty scary,” Keenan said.

“Over 90 percent of university students have at least one credit card and that one credit card is used for ‘emergencies’ or ‘school expenses’ and those ‘emergencies’ can be for entertainment purposes.”

“That’s a very common occurrence for college or university students that go away for the first time, they’ve never had to pay a bill before, very few of them have had to pay a phone bill or their Internet bill and they don’t know how to do it, they’ve never been shown, and that goes back to getting your kids involved in the purchasing process, then they’re going to be more prepared.”

The average balance on a credit card for a youth graduating from university in Canada is approximately $3,400, Keenan said.

“That isn’t all that big of an amount in the grand scheme of things but then you have to add $26,000 in student loans and the terrible economic environment kids are graduating into…getting a credit card is a very, very good way to build credit but it’s a slippery slope and can destroy credit as well.”

Students should avoid buying their textbooks with credit cards, Keenan said.

“The average cost of books for a complement of courses these days is about $700…some students are still paying for their first year books four years later.”

Then, of course, students have to eat.

“If you are a college or university student with a meal plan, eat as many meals as you can at school…a lot of students still eat meals out, all the time, at fast food restaurants,” Keenan said.

“Those without a meal plan should buy fresh food instead of, for example, frozen lasagna…and make a pot of spaghetti instead of buying canned spaghetti.”

Have parents and students come to Credit Counselling Service of Sault Ste Marie and District with horror stories of unwise school-related spending and resulting financial difficulties?

“Without a doubt,” Keenan said.

“One of the most common things we see is repayment of student loans, and there are programs out there from the government to help people pay their student loans as long as they’re keeping up to date with them.”

People should ensure they spend their student loans appropriately in the first place, Keenan said.

“I’ve had clients come in who’ve spent their student loans to take a vacation, or on entertainment.”

“Outside of student loans, it’s credit card use, I’ve had a lot of younger people come into my office with really large credit card bills of up to $7,000, because they didn’t budget and some of them have had more than one credit card.”

“You swipe the card today and you pay tomorrow, you’re borrowing from wages from a job you don’t yet have.”

Keenan said 23 percent of Credit Counselling’s clients are between the ages of 21 and 30, most of them with some form of school-related debt, a significant part of that being credit card debt.

Credit Counselling Service of Sault Ste Marie and District can help with credit card bills.

“We can talk to clients about developing a plan to pay back a lot of that credit card debt they’ve created, student loans we can’t touch before seven years have passed, that’s a government rule, but we can definitely help negotiate a reduction in interest in their credit card repayment plan.”

Keenan also cautioned parents to be extremely wary of co-signing for student loans.

“One of the biggest problems we see is with parents co-signing student loans, it can spell a lot of financial disaster for everybody down the line, if the student runs into financial problems and can’t pay for that loan, the parents end up paying for it…co-signing a loan is something to watch out for.”

Before co-signing, parents should be sure of being able to repay a student loan if it ends up in their laps, Keenan said.

Credit Counselling Service of Sault Ste. Marie and District may be contacted at 705-254-1424.