516 - 294 Portage Ave
Winnipeg, MB R3C 0B9
Phone #: (204) 989-1900
Fax #: (204) 989-1908
Toll Free #: 1-888-573-2383
E-mail: [email protected]
debthelpmanitoba.com
Todays Session
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Overview of Services
Banking in Canada
Money Management
Credit
• Common types of credit available to
students
• Using credit wisely
• Question and Answer period
CFCS History
• Established in 1974 as Community Income Tax Services
to combat unregulated tax discounting
• Credit Counselling began in 1976
• Provincial funding in 1982
• United Way Member Agency since 1984
• Manitoba Liquor & Lotteries funding since 2004
• CFCS is a registered charity and a nationally accredited
non profit credit counselling agency
Our Vision: All Manitobans will have the capacity to make
informed decisions and navigate successfully the various
financial systems that have impact on their daily lives
CFCS Services
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Credit and Financial Counselling
Gambling Addiction Program
Community Volunteer Income Tax
Debt Management Program
Educational Workshops
Information and Referrals
(All services are confidential; counselling services are FREE)
Community Volunteer Income
Tax Program (CVITP)
You may qualify to have your tax return(s) completed for free by
trained CRA volunteers if your tax returns are very basic and
your income is below certain levels
Seasonal: February – April
Tax filing deadline is April 30 each year
CFCS works in partnership with
Canada Revenue Agency (CRA)
Opening a Bank Account
To open an account, you have to:
• Go to the bank in person
• Provide the bank with some identification (ID).
• You must use original ID, not photocopies.
Types of bank accounts
• Chequing accounts: for day-to-day banking
transactions, like making a purchase
• Savings accounts: where you can set money
aside for savings, emergencies, etc.
Bank or Credit Union?
Banks:
Regulated by the Canadian Government
Typically charge fees to have a bank account, but most offer student
bank accounts without fees
Have locations throughout Canada- easy access
5 major banks in Canada: TD, CIBC, RBC, Scotiabank, BMO
Credit unions:
Regulated by the Provincial Government
Usually have lower bank fees
Do not have locations all over Canada
What can you do if the bank won't
open an account for you?
BANKS have the responsibility to provide a bank account as long as the
person has 2 approved pieces of identification, one with a picture
• The bank must provide a written denial
• For more information or to file a complaint:
Financial Consumer Agency of Canada - 1-866-461-3222
Website: http://fcac-acfc.gc.ca/eng/default.asp
CREDIT UNIONS have the right to deny accounts to people as they have
different operational standards
• For more information or to file a complaint:
Financial Institutions Regulations Branch – 1-204-945-2542
Website: http://www.gov.mb.ca/fs/cca/firb/index.html
Budgeting
Why Should I Budget?
• To take control of your finances and financial
situation
• To make efficient use of your money and be a
smart consumer
• To save money
• To exit school with as little debt as possible
• To live within your means
• To reach your short, mid- and long term goals
5 Steps in a Successful
Budget
1. Determining income
2. Cost of Living
3. Track Expenses
4. Review, Revise and plan
5. Maintain Plan & Motivation
Determining Income
• This can be a bit complicated for students
• Consider all sources of income, such as:
• Part time or full time work
• Money from family members
• Savings
• Money from student loans
• Scholarships and bursaries
• When considering employment income, use net
income- money you actually receive after
deductions for things like Employment Insurance or
Income Tax
Case Study: Jennifer
• Jennifer is attending the University of Manitoba. During the summers she
will return to her home country of the United States and live with her
parents, where her living costs will be paid for by her parents. Therefore,
she needs to budget for spending September-April (8 months) in Manitoba
Jennifer will be working one night a week (equaling 6 hours a week) in a
coffee shop on campus. She will be making minimum wage ($10.70/hour).
Her paycheque after deductions will be $125 every 2 weeks, equalling
$250/month
• She has some personal savings from when she worked during her
summers in high school, and she intends on working every summer when
she returns home.
• Jennifer is also lucky because her parents also have some savings that
they will use to help her pay her tuition, books, and living costs.
• She has applied for a bursary for her first year, and received $3000.
• She has received a student loan for her first year of study from the United
States.
Case Study: Jennifer
Note that I have divided Jennifer's source of income into two categoriesLump sum income (to be received before school starts) and ongoing
sources of income that will be received monthly during the school year
Your Living Expenses
• You will have both one time costs and ongoing
expenses (your cost of living) while living and attending
school in Manitoba
• Ongoing costs can include:
• Rent
• Food
• Entertainment
• Personal items (ex: shampoo)
• Utilities (ex: cell phone)
• One time costs can include:
o Books
o Other supplies (such as a computer)
o Tuition
Cost of Living: Ongoing Expenses
• Cost of Living (COL) includes all ongoing
expenses needed to maintain your daily life and
important expenses (rent, food, health, etc)
• The COL does not include any debt or credit
payments
• The COL shows an average look at a month
(e.g. if you spend approx. $1200 on gifts each
year the monthly average would be recorded as
$100)
Case Study: Jennifer’s Ongoing Expenses
• Jennifer and two of her friends are going to rent a house together. The
house costs $1300 a month, and that includes utilities like heat and
water.
• They plan on hooking up cable and internet, which will cost them $120
a month. They will split this cost 3 ways.
• Jennifer will pay for her cell phone separately.
• She plans on taking the bus everywhere she can, but wants to budget
some money for taxi’s for the occasional trip.
• She purchased the U of M health coverage as part of her tuition fees,
which helps her pay her health care costs. However, she does have a
regular prescription that she must fill every month. This costs $50 total,
but she only has to pay 20% of this (she gets 80% coverage from her
health care plan).
• She has budgeted $50 a month for clothing. This is taking into account
having to purchase some winter clothing in November.
Case Study: Jennifer’s Ongoing
Expenses
Expense
Monthly cost
Rent
$450
Cell phone
$65
Internet/cable
$40
Groceries
$200
Entertainment
$50
Clothing
$50
Bus Pass
$67.75
Taxi
$20
Toiletries
$40
Health care
$10
TOTAL
$992.75/month for 8 months
Case Study: Jennifer's One-Time
Expenses
There are some expenses that Jennifer will have to pay for at
the beginning of the year, before school starts
Expense
Cost
Tuition
$17,000
Books/supplies
$2000
Moving costs
$0
Damage deposit at rental
(Jennifer’s portion)
$220
TOTAL
$19,000
Allocating Income
Case Study: Jennifer
INCOME
Lump sum income
Monthly income
TOTALS:
$21,500
$750/month
EXPENSES
One-time expenses
Monthly
expenses
TOTALS:
$19,000
$992.75
If we compare her monthly income to her monthly expenses,
Jennifer is short by $242.75 a month ($1942 for the 8 months she
will be in Manitoba)
After Jennifer pays her one-time expenses at the beginning of the
school year, she will have $2500 left over.
Therefore, Jennifer will have to use that $2500 to help cover her
ongoing expenses throughout the year
Tracking Expenses
Tracking expenses verifies the accuracy of your COL.
There are a number of ways to track expenses:
• Keep all receipts; tally for the month or the week.
• Write down all purchases/spending in a notebook.
You may be surprised how quickly small expenses add up,
like buying coffee daily.
*recording purchases daily may be easier than tallying up
all purchases at the end of the month.
Review, Revise & Plan
If you have a shortfall (spending more money than you
make):
• How can you cut back on your spending?
• Can you increase your income?
• Can you set limits on your spending?
• For example, limiting eating out to $10 a week
If you have a surplus (money left over):
• Pay off debt
• Increase savings
• Start an emergency fund for unexpected
expenses
Setting Goals
“ SMART ”
Specific – Exactly what is the goal?
Measurable – What is the cost in dollars?
Action oriented – What is the plan and structure?
Relevant – Is the goal realistic for you?
Time certain – Process should have due date
Credit:
Credit cards vs. debit cards, the cost of
interest, and using credit wisely
What is a Debit Card?
A debit card is a card issued by a bank, letting you access
the funds you have in your account.
• With every purchase, your bank balance goes down.
• You can also withdraw funds from your account at an
ATM.
What is Credit?
Credit is the ability to obtain goods or services before
payment, based on the trust that payment will be made in the
future.
What is Interest?
Money you pay to the credit card company for the ability to use borrowed
funds.
• If you do not pay off your credit card each month, your interest charges
will increase the cost of everything you buy.
• if you pay off your balance in full each month and don’t use the card for
cash advances, you won’t pay any interest.
Credit Cards
• A credit card lends the user a limited amount of
money to pay for goods and services, with the
promise to pay the money back by a certain date
• If you don’t pay the balance off in full every month,
you will be charged interest
• Credit cards are different from debit cards as a debit
card allows you access to funds in your bank
account while a credit card allows you access to
BORROWED funds that you must repay.
• The amount of borrowed money you can access is
called your credit limit
• Many banks offer student credit cards with low credit
limits.
Cash Advances on Credit
Cards
• A cash advance is money withdrawn from a
credit card
• It is still debt, and the amount you withdraw
will be added to your credit card balance, the
same way as a purchase would be
• The interest on cash advances is even
higher than regular purchases
• Interest is charged from the moment the money is
withdrawn until the day it is entirely paid off
Annual Percentage Rate (APR)
• Yearly amount of interest applied to borrowed
money or loans
• to find out how much you are paying divide your
APR by 12 and multiply your debt load by the
interest
Example: your credit card has 18.99% APR
18.99%/12 = 1.58%
multiply your balance by this amount to find how
much interest you pay monthly
Lines of Credit
• A loan that lets you borrow money up to a certain
limit
• Given by a financial institution to those who qualify
• Eligibility requirements can include a certain level
of income, pledging security, a good credit rating,
etc.
• Advantage: lower interest rates, usually have no fees
• Disadvantage: interest rates change depending on
the market conditions, and easy access to borrowed
money may get you in trouble with debt
Lines of Credit
• Some banks offer student lines of credit to help
students pay for the cost of education
• many require that you have a Canadian cosigner
• Interest only payments are required while you
are in school
Co-signer: When someone co-signs a debt for
you, they are taking legal responsibility for that
debt. If you don’t pay back what you owe, the cosigner becomes responsible for paying back the
debt.
Student Loans
• Loans to help you pay for school- typically given by the
government
• To qualify, you must be a Canadian citizen, permanent
resident (landed immigrant), or protected person. You also
must be a Manitoba resident
• Usually you receive a federal portion from the Government
of Canada and a provincial portion from the Government of
Manitoba
• You apply for both portions with Manitoba Student Aid
• Visit canlearn.ca for more information
• You do not have to make payments on the loan until 6
months after you stop attending school
Cell Phones
• When you sign your contract you are committing to
make payments every month for a pre-determined length
of time
• If you stop making payments and do not cancel your
contract, you can incur debt to your phone company
• Cancelling a contract costs money
• Be VERY cautious about getting a phone contract for
someone else, but putting it in your name
Source: fcac.gc.ca
credit card payment
calculator
The Cost of Credit
Balance Interest
rate
Monthly
payment
Time it will
take to pay
off
Cost of
interest
Total cost
$1000
19%
Minimum
payment* ($30
initially)
10 years and 5
months
$889.40
$1,889.40
$1000
19%
Minimum
payment* + $5
6 years and 4
months
$559.97
$1559.97
$1000
19%
$50 fixed
payment
2 years and 1
month
$212.01
$1212.01
$1000
28%
Minimum
payment* ($30
initially)
19 years and 2
months
$2652.10
$3652.10
$1000
28%
Minimum
payment* + $5
8 years and 8
months
$1220.65
$2220.65
$1000
28%
$50 fixed
payment
2 years and 4
months
$362.78
$1362.78
* Minimum payment calculated as $10 or 3%, whichever is greater. As you pay off your
balance, the minimum payment decreases
Using Credit Wisely
Before getting credit
1. Read the Credit Card Application and ask questions
2. Know yourself and your spending habits.
3. Limit the number of credit cards you apply for.
When you Have Credit
1. Avoid impulse buys.
2. Pay off your credit card every month
3. If you can’t pay off your card balance, make AT LEAST the
minimum payment
4. Make regular payments to help build a good credit history.
5. If your credit card balance is growing, stop using your credit
card until you get your finances under control.
Source:
FCAC
Using Credit Wisely
6. Avoid taking cash advances on your credit card
7. Every month, read your credit card statement to check
for mistakes
8. If your credit card has a rewards program, don’t buy
things you don't need just to get points.
9. If unexpected expenses come up, talk to your financial
institution about your options.
10. Keep your card, your PIN, and your security code safe,
private, and secure.
Source:
FCAC
The Dangers of Using
Credit
• Having limited knowledge of debt and credit can
put you at risk.
• The convenience of some forms of credit make
it easy to accumulate debt.
• Interest rates can cause your debt to increase
faster than you can pay it off.
Remember that having a credit card doesn’t
increase the amount of money you have available
to spend. A credit limit is borrowed funds, not
actual money.
Your Credit Report- the
Importance of Using Credit
Wisely
• When you use a credit card (or other types of
credit/loans), your payment history is reported to
2 credit bureaus in Canada: Equifax and
TransUnion. This information creates your credit
report, a snapshot of your borrowing history.
• If you have missed payments, been late making
payments, or have not paid your debts, you will
have more difficulty borrowing money in the future.
Do you have questions about
anything you learned today?
Are you struggling with debt?
Do you want help setting up a
budget?
Give us a call!
516 - 294 Portage Ave
Winnipeg, MB R3C 0B9
Phone #: (204) 989-1900
Fax #: (204) 989-1908
Toll Free #: 1-888-5732383
E-mail: [email protected]
debthelpmanitoba.com