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By Mikael Castaldo, RateHub.ca
Special to the Financial Independence Hub
Pursuing a post-secondary degree marks a significant chapter in one’s life: and it’s being dramatically rewritten for millions of students across Canada in the wake of COVID-19. Campuses on lockdown, classes gone digital, and increasingly gloomy job prospects are just some of the new realities students face.
But while these times pose new challenges, there’s some silver lining as many schools have made moves to ease grading criteria and the federal government has stepped in a big way to launch new financial aid programs. If you’re a post-secondary student who’s looking to better manage your money during COVID-19 but aren’t sure where to start, you’ve come to the right place.
Below is a list of what I consider to be the key first steps students should take to get a better grip on their finances during COVID-19:
1.) Apply for CESB
Whether you’re a freshman whose paid summer internship was abruptly cancelled or a recent grad struggling to land a position due to the very real impact COVID-19 has had on the job market, you can seek financial support from the federal government by applying for CESB.
CESB – which is short for Canada Emergency Student Benefit – is a form of unemployment insurance and is the single-most impactful form of financial support you can receive as a student during COVID-19.
Here are some things you need to know:
How much support can you get?
If you qualify for CESB, you can receive one of the following amounts for a set four-week period:
- $1,250 either because you’re: 1. unable to work due to COVID-19, 2. actively on the job hunt but can’t successfully land a position, or 3. currently employed but only earn a monthly income of under $1,000 before taxes
- Up to $2,000 if you tick off any of the three boxes above and you also have a disability or you’re a parent with a child under the age of 12.
Who does (and doesn’t) qualify for CESB?
While CESB is mostly geared towards students currently enrolled in a post-secondary institution, you can also receive support even if you’re not technically in college or university right now. For instance, you can receive CESB if you’re a recent post-secondary grad and completed your education in December 2019 or later. Additionally, if you’re in high school and applied for a post-secondary program set to start by February 2021, you also may qualify.
You must also be a Canadian citizen, permanent resident, registered Indian, or in very rare cases, recognized as a person in need of protection by the Refugee Board of Canada.
Unfortunately, that rules out international students.
The type of program and institution you’re enrolled in matters too. You’ll need to be in (or applying to join) a program that’s at least 12 weeks long, working towards a certificate or degree, and a student in one of the post-secondary institutions recognized by the government (the good news here is the list of designated schools is long and widely encompassing).
Aside from just being an eligible student and ticking all of the boxes above, you must also be actively looking for a job and unable to find employment due to COVID-19. You’re not eligible to get any CESB payments if you aren’t actively looking for work, have a job that earns over $1,000 per month before taxes, or already receiving support from the Canada Emergency Relief Benefit.
How to apply
CESB is available for up to a maximum of 16 weeks; however, you’re not guaranteed to get payments for that entire length of time and must apply for CESB every 4 weeks. The idea being you can keep reapplying and receiving support until you no longer need it.
The 4-week application periods aren’t arbitrary and follow a strict schedule based on the following dates:
- May 10 to June 6, 2020 (no longer available)
- June 7 to July 4, 2020
- July 5 to August 1, 2020
- August 2 to August 29, 2020
As long as your SIN is registered on the CRA website and you’ve filed your 2018 tax return, you should be able to apply online straight from CRA’s My Account. If you don’t, you can call 1-800-959-2019 or 1-800-959-2041. Phone lines are open seven days a week between 6 am to 3 am. You’ll also want to set up direct deposit on your CRA My Account so your CESB payments can be sent straight to your bank account digitally.
Remember, CESB isn’t intended as a free subsidy for all students but is temporary financial support for those who are actively looking for a job and can’t get one. The Government of Canada may even require you to submit proof you’ve been searching for a job, so be sure to keep records of your emails and other communications with potential employers.
2.) Set a budget and cut discretionary spending
A well-maintained budget can help you save hundreds of dollars every month – and in an unprecedented time like this – every dollar counts.
The first step of creating a budget is to start tracking how much you spend in the first place.
List out every purchase you make by amount and by type. And yes, I’m talking about every purchase. Spent $10 on
Lunch? Track it. Bought $50 worth of groceries? Track it. Use your smartphone or scribble down in a small notebook, it’s up to you, just track it.
While you can use apps to automate the process, I recommend noting down every purchase manually since it’s the best way to put your spending habits under the microscope, spot your biggest money wasters, and discover how even small nondescript purchases can add up. Nothing can get you more motivated to start meal prepping at home than seeing exactly how much you spend on takeout.
Once you have a grasp of your spending habits, start separating needs from wants and cutting out any discretionary purchases. Next, set strict spending caps for every category (i.e. no more than $100 on groceries per week) to ensure your monthly income can cover those essentials.
If you’ve got any money left over at the end of the month, don’t splurge and instead set aside the money in a high-interest savings account to gradually build up some cash reserves.
3.) Check if you can receive relief from your biggest bills
If you own a car, reach out to your insurance provider. In the wake of COVID-19, many are offering either rebates, discounts, or deferrals that can help cut down your monthly insurance payments. The same goes for utility bills. For instance, both Toronto Hydro and BC Hydro are offering support to customers who may be under financial pressure with options like payment deferrals or flexible payment plans with no penalties.
Banks are also stepping up in their own way. If you currently owe credit card debt, reach out to your bank and ask to receive payment deferrals and a temporary drop in your card’s interest rates. That can help postpone your minimum payments and ensure more of your money can go towards covering your more immediate essential expenses. Ratehub has provided a breakdown of how credit card minimum payment deferrals work and how terms differ by bank.
As far as rent goes, unfortunately, there isn’t a specific federal program that tackles monthly lease payments. Ideally, any new income support you receive from CESB (covered earlier) would go towards covering some of your rent. If you’re facing financial hardship, it’s also recommended you start an open and honest dialogue with your landlord about your situation and negotiate the possibility of a temporary reduction in rent payments. It’s worth noting that most provinces have put a freeze on evictions during this time, which is far from a long-term solution, but can at least provide some peace of mind that a completely non-empathetic landlord can kick you out.
4.) Use credit cautiously
If you’re a post-secondary student, there’s a good chance you have a credit card in your wallet. And while you may be tempted to start charging more purchases to your card and carrying a balance, especially if you’re cash strapped, you’ll want to approach this idea cautiously.
Any credit card balance you don’t pay off in full translates to debt, which means you’ll owe extra in interest. And credit cards don’t have exactly the lowest rates out there. Even student credit cards come with annual rates of 19.99%. Over the course of a year, that can add up to roughly twenty cents extra in interest for every dollar in debt you carry on your card.
Remember, you’ll also have to make at least the minimum payment on your credit card every month, which works out to about 3% of your balance.
If you’re low on options, only use credit to pay for absolute essentials (like groceries) and keep your balance as low as possible. Additionally, get familiar with what exactly your credit limit is and avoid maxing out your card at all costs. As covered above in tip 3., you’ll also want to check with your bank if you can receive payment deferrals and a temporary reduction in your card’s interest rate.
You’ll also want to be very cautious about the idea of opening up new lines of credit. For one, applying for too many types of credit within a short span of time can ding your credit score. Secondly, as a student, you may find it difficult to qualify for low interest rate loans from the reputable institutions. And finally, avoid payday or short-term loans like the plague. These predatory loans charge incredibly high annual interest rates (we’re talking 400%) and will lead to a world of debt problems.
5.) Keep on the lookout for new income opportunities
Don’t just rely on CESB and the traditional job hunt. Be on the constant lookout for scholarship programs, tap the Canada Summer Jobs Program and Job Bank for new work opportunities, and keep in the know about new grants launched by the government related to your field.
6.) Use money saving apps to your advantage
There are numerous free apps out there – from the likes of Flipp and Checkout51 – that can consolidate grocery coupons and make it easier to spot deals. By using these apps to your advantage, you can potentially save several dozens of dollars every month on household essentials. That can add up, especially at a time when every dollar counts.
My only word of caution here is to stick with grocery saving apps. Avoid apps that offer deals on electronics or clothes, since they may tempt you to spend more on non-essentials you weren’t planning on buying under the guise you’ll save with a deal.
Mikael Castaldo is the senior manager for credit cards at Ratehub.ca, a website that compares credit cards in Canada, as well as mortgage rates, high-interest savings accounts, chequing accounts, and insurance rates with the goal to empower Canadians to search smarter and save money.
