Tips for students on managing their summer earnings

August 9, 2023

Throughout the summer months, when not in full-time studies many students will work to earn extra money to help with expenses throughout the upcoming school year. Balancing work with enjoying some summer fun will help ensure students are both refreshed and ready to take on the challenges of the upcoming school year.

With September only a few weeks away and summertime coming to a close, students may be wondering how to manage their hard earned money. It can feel a bit overwhelming, so it’s important for students to take some time to think through ways to prioritize options and obligations.

A step-by-step approach to managing summer earnings

Step 1

Start by categorizing expenses into two categories: essential expenses (need to do) and the discretionary expenses (want to do).

Essential school expenses include things like tuition, books/course materials, rent or residence costs, meals (groceries or school food plan). Other expenses that can be considered as essential are a laptop computer, commuting costs (public transit or car expenses including gas and insurance), cell phone and debt repayment.

Discretionary expenses include things like buying new clothes, entertainment, dining out and fast food.

Step 2

Take your list of essential expenses and place a dollar value next to each expense and then subtract the total from their earning/savings. This calculation will help identify how much is left over for the discretionary, non-essential expenses.

Completing the first two steps will help students assess their personalized budgets and create a clear path for managing their finances to ensure expenses are covered and they do not run out of money half way through the school year.

Step 3

If there is a budget shortfall, students may need to think through other ways to help their budget like searching out scholarships or bursaries, stretching their dollars through smart shopping, price comparing or thrifting through online platforms that sell gently used items and perhaps finding a manageable part-time job. Students who are in the enviable position of having excess funds in their budget may want to consider setting aside these dollars in a high interest savings account or investing the money in a Tax Free Savings Account (TFSA).

Step 4

Throughout the school year divide your monies between a savings account and a chequing account. By doing this, students can separate their monies earmarked for day-to-day living from their savings – making it less likely to dip into these dollars.

Banking for students

Most financial institutions aim to assist students with their finances by reducing bank account fees with either a service charge free student account or a discount to the monthly fees. Proof of school enrollment is often required to qualify for these types of accounts. Be sure to check what student account options are available and meet your needs. Upon qualification and approval for a student account, there are also other financial products available like student credit cards to help with unexpected expenses and help build a credit score and student-lines-of-credit to assist with tuition payments.

Income tax filing for students

Students should be aware that they must file their income tax annually. It is important to understand what qualifies as taxable income and non-taxable income as well as tax deductions and tax credits available to students.

Common taxable income for students can include:

• employment income

• gratuities or tips

• Registered Education Savings Plan (RESP) - educational assistance payment (EAPs) made up of investment growth and government grants like the Canada Education Savings Grants and Canada Learning Bonds

• scholarships, bursaries, fellowships, study grants

Common non-taxable income for students can include:

• GST/HST credits or related provincial program payments

• scholarships or bursaries eligible for the scholarship exemption

Common deductions and tax credits

Deductions and tax credits can help in reducing tax burden. Deductions are subtracted directly from gross income to arrive at your net income, which is the income used to calculate any tax owing.

There are two types of tax credits. A non-refundable tax credit is subtracted from taxes owing - but not below zero - to create a refund while a refundable tax credit is subtracted from taxes owing and could create a refund if the tax credit is greater than taxes owing.

Moving expenses are an example of a common tax deduction. Some types of non-refundable tax credits include interest paid on student loans, Canada employment amount (work related expenses and supplies needed for work) and tuition [post-secondary institutions supply form T2202A (Tuition and Enrollment Certificate)]. An example of a refundable tax credit is the Canada training credit, which is designed to help with the cost of eligible training fees.

Building on your education is an important factor for the foundation of a fulfilling career, however this may come with its challenges for students such as having limited time to work and earn income along with additional school expenses. This can be made easier for students by building awareness about various government programs and post-secondary institutional incentives available and taxation planning. To feel equipped to take on the challenge of another school year, finding a way to balance work - whether in the workforce or school work - with entertainment and summertime fun is key.

FirstOntario Credit Union in partnership with Credential Securities and Credential Asset Management Inc. has an experienced team of advisors specializing in various areas of wealth management including retirement planning, investment management, estate and succession planning, individual financial risk management and more. These professionals are here to help you plan for the future and reach your financial goals. Visit FirstOntario.com/Investments or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.

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