Finance With Rohan

Business and stocks, explained in simple words.

Tag: student money

  • Emergency Fund First: How Much Cash Should a Student Keep?

    Emergency Fund First: How Much Cash Should a Student Keep?

    Introduction

    Your laptop can break. You can lose a part-time job. These things cost money. And they often happen at the worst time. That is why an emergency fund comes first. Before you invest. Before you buy stocks. Before anything else. You need cash set aside for bad days. This guide shows how much cash a student should keep, and how to build that fund step by step.

    What It Is

    An emergency fund is money you keep just for surprises. It is not for fun, clothes, or a holiday. It is for real emergencies only. A broken phone counts. A lost job counts. A sudden dental bill counts. A sale on shoes does not count.

    The money must be easy to reach. That is why it sits in a savings account, not in stocks. Stocks can fall in value and take time to sell. Your emergency money should be ready in one or two days.

    Think of it as a safety net. It does not stop you from falling. But it stops the fall from hurting so much. It stops a small problem from turning into debt.

    How It Works

    Most experts say you should keep three to six months of expenses in your fund. Expenses are the things you must pay for each month. Rent is an expense. So is food. So is your phone plan. Add them up. Then multiply by three. That is your first goal. Multiply by six. That is your full goal.

    Students often have low costs. That is good news. If you spend $800 a month, three months of costs is $2,400. Six months is $4,800. Those are big numbers. But you do not need to save them all at once. Build the fund bit by bit.

    Start with a small goal. Save $500 first. Then aim for $1,000. Then keep going. Small steps are easier. They also keep you going.

    Treat your savings like a bill. When money comes in, move some to your emergency fund first. Then spend what is left. This is called ‘pay yourself first.’

    Keep the money in a separate savings account. A high-yield savings account is a good choice. ‘High-yield’ means it pays more interest than a normal savings account. Interest is the small amount the bank pays you for keeping your money with them. Your money stays safe, grows a little, and you can still reach it fast.

    Do not invest your emergency fund. Stocks can drop. Your emergency money must be there when you need it. Keep it in cash.

    An Example With Numbers

    Let us look at Maya. She is a student. She works part-time at a cafe. She earns about $1,200 a month. Here is what she spends each month:

    • Rent (shared apartment): $600
    • Food and groceries: $250
    • Phone plan: $50
    • Bus pass: $100
    • Total: $1,000 a month.

    Maya’s first goal is one month of costs: $1,000. She saves $100 a month. It takes her 10 months. That is slow, but it is steady. After 10 months, she has a real safety net.

    Her next goal is three months of costs: $3,000. She keeps saving $100 a month. It takes 20 more months. So she picks up extra shifts in the summer and saves $200 a month for three months. That adds $600. Now she reaches her goal faster.

    Then her laptop breaks. The repair costs $300. Maya feels stressed, but she can pay for it. She uses money from her fund. She does not need a credit card or go into debt. Then she builds the fund back up. That is how it is meant to work.

    Common Mistakes

    • Saving nothing because the goal looks too big. But $50 is better than $0. Start small. Start now.
    • Keeping the money in your main account. If you see it, you will spend it. Keep it in a separate account.
    • Using the fund for fun. A concert is not an emergency. Neither is a new pair of shoes. If you use the fund for fun, it will be empty when a real problem comes.
    • Investing the fund in stocks. Stocks can fall just when you lose your job. Keep emergency money in cash.
    • Never refilling the fund. If you use the fund, fill it back up. It is a habit, not a one-time job.
    • Waiting for the ‘right time’ to start. There is no perfect time. Even $25 a month counts.

    Final Thoughts

    An emergency fund is not exciting. It will not make you rich. But it is the first step in money. It gives you calm and choices. And it keeps small problems small. Start with $500. Then aim for one month of costs. Then three months. You just need to start. Your future self will thank you.

    Related post: What Is a TFSA? A Simple Guide for Canadian Students

    Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

    Sources: Investopedia: Emergency Fund: What It Is and How to Start One; Canada.ca (Financial Consumer Agency of Canada): Setting up an emergency fund

  • What I Learned About Credit Cards and Credit Scores

    What I Learned About Credit Cards and Credit Scores

    What Is a Credit Card?

    A credit card is basically borrowed money from the bank.

    Example: Credit limit = $2,000. You spend $500. You owe the bank $500.

    Your credit limit is basically how much you are allowed to borrow.

    2 Important Dates

    1. Statement Date — This is when your billing cycle ends. Your statement shows: what you spent, statement balance, minimum payment, due date.
    2. Payment Due Date — This is the last day you need to make your payment.

    Best move = Pay the full statement balance by the due date. This generally means you don’t pay interest on purchases if you meet the card’s grace-period rules.

    Statement Balance vs Current Balance

    Statement balance = What you owed when the statement came out.

    Current balance = What you owe right now, including new purchases.

    Example: Statement balance = $500. Then you spend another $100. Current balance = $600.

    Minimum Payment and Interest

    Minimum payment is the smallest amount you have to pay. But if you only pay the minimum, you can carry the rest and get charged interest.

    APR = Annual Percentage Rate. Higher APR = more interest.

    So basically: Pay full statement balance = avoid unnecessary interest.

    What Is a Credit Score?

    A credit score is basically a number that shows how you handle borrowed money. In Canada: 300 to 900. Generally, higher = lower risk to lenders.

    Good credit can help with: credit cards, car loans, mortgages, lines of credit, some rental applications. It can also help you get better interest rates.

    What Affects Your Credit Score?

    1. Payment History — Pay on time = good. Miss payments = bad.
    2. Credit Utilization — How much of your credit you’re using. Example: $500 balance ÷ $5,000 limit = 10%. Generally, lower utilization is better.
    3. Credit History — How long you’ve had credit. Generally, longer history is better.
    4. Types of Credit — Credit cards, loans, lines of credit. You don’t need to take loans just to have different types.
    5. Credit Inquiries — Hard check: usually happens when you apply for new credit. A hard inquiry is added to your credit report and can temporarily lower your score. It can stay on your credit report for years, depending on the credit bureau. However, lenders usually care much more about recent inquiries, often looking at roughly the last 2 years. Soft check: usually doesn’t affect your score.

    Simple rule: If you don’t need the new credit, don’t take a hard check just for a higher limit.

    How to Build a High Credit Limit

    Having a higher credit limit can help keep your utilization low. There are basically 2 ways:

    1. Ask your current bank: “Do I have a pre-approved credit limit increase?” Then ask: “Will this require a hard credit check?” If it requires a hard check and you don’t really need it, don’t do it just for a higher limit.
    2. Get another credit card — look for cards with no annual fee, good rewards, high potential credit limits. Some companies offer pre-approval with a soft check. But when you actually apply for a new card, it may require a hard check.

    Keep Utilization Low

    Example: You have $20,000 total credit limit. You spend $1,000. Your utilization is 5%.

    So basically: Higher credit limit + lower spending = lower utilization. You don’t need to spend more just because you have more credit.

    Do You Need to Carry a Balance?

    No. You don’t need to pay interest to build credit. You can: use credit card → pay full statement → build credit.

    Credit Report vs Credit Score

    Credit report = your credit history. Credit score = number based on your credit history. In Canada, the two main credit bureaus are Equifax and TransUnion.

    Credit Card Rewards

    Some cards give cash back, points, travel rewards. But don’t spend extra just for rewards. Don’t spend $100 just to get $2 back.

    Closing an Old Card

    An old card can help with your credit history and available credit. Before closing it, look at: annual fee, how old the card is, your total available credit, whether you actually need it. Don’t keep an expensive card only for your credit score.

    How to Win With Credit

    1. Pay on time
    2. Build a high credit limit responsibly
    3. Keep utilization low
    4. Don’t carry unnecessary debt
    5. Don’t apply for unnecessary cards
    6. Don’t pay interest just to build credit
    7. Let your credit history grow

    Simple formula: High limit + low spending + on-time payments + time = strong credit.

    Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

    Sources: My own study notes, with facts from Canada.ca / FCAC credit card guidance.

  • What I Learned About Credit Cards as a Student

    What I Learned About Credit Cards as a Student

    Introduction
    I got my first credit card offer as a student. It looked exciting. A small card could buy things now. I could pay later. That sounded easy. It sounded almost like free money. It is not free money. I learned that lesson slowly. This is what I learned.

    What I Learned
    A credit card lets you borrow money from a bank. You do not own that money. You must pay it back. Each card has a limit. A limit is the most you can borrow on that card. Each month, you get a statement. A statement is a list of what you bought. It also shows a due date. The due date is the day you must pay by. You can pay the full amount. Or you can pay a minimum payment. A minimum payment is the smallest amount the bank asks for that month. It sounds helpful. But it can be a trap. If you pay only the minimum, the rest stays as debt. Debt is money you still owe. Then interest is added. Interest is the extra cost of borrowing. Many credit cards charge interest of about 20 percent a year. That is high. So a small purchase can cost much more over time.

    A Mistake or Surprise
    My surprise was how fast interest can grow. I thought the minimum payment would solve the problem. It did not. It only slowed the problem down. The debt stayed. The interest kept adding. I also learned about a credit score. A credit score is a number. It shows how well you handle borrowed money. Paying on time can help your score. Missing payments can hurt it. A good score can help later in life. For example, if you spend $20 a week on a card, that is a general example. It is not my real spending. The point is simple. Only spend what you can pay back in full.

    What I Do Now
    Now I keep it simple. One card is enough at the start. I do not need many cards. I set a reminder before the due date. I check my statement each month. I look for mistakes. I try to pay the full amount. If I cannot pay in full, I pay as much as I can. I do not buy things just because I have a card. I ask one question first. Can I pay for this from money I already have? If the answer is no, I wait. That rule helps me stay in control.

    Final Thoughts
    A credit card is a tool. It is not free money. It is borrowed money. The minimum payment trap is real. Interest of about 20 percent can make debt grow fast. Paying in full is the safest habit. Your credit score grows from small, steady, on-time payments. Start with one card. Learn the rules. Use it slowly. That is what I am learning to do.

    Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

    Sources: Financial Consumer Agency of Canada (FCAC) / Canada.ca – Credit cards: https://www.canada.ca/en/financial-consumer-agency/services/credit-cards.html

  • What I Learned About Opening a TFSA as a Student

    What I Learned About Opening a TFSA as a Student

    Introduction
    I heard about a TFSA for a long time. Friends talked about it. Online posts talked about it too. I nodded, but I did not really understand it. It sounded hard. It sounded like something only adults with lots of money use. As a student, I felt lost. So I decided to learn the basics. This is what I learned.

    What I Learned
    TFSA means Tax-Free Savings Account. Tax-free growth means the money inside can grow without tax on that growth. That is the main idea. It is simple, but it is powerful. A TFSA is an account type. It is not an investment itself. Think of it like a box. You open the box first. Then you choose what goes inside it. Inside, you might have savings or investments. The box is the TFSA. The things inside are separate. Contribution room is the amount you are allowed to put in. In Canada, TFSA contribution room starts at age 18. New room is added each year. If you do not use all your room, it carries forward. That means it stays for later years. You do not lose it just because you did not use it that year.

    A Mistake or Surprise
    My mistake was thinking a TFSA was one product you buy. I thought you just open it and it grows by itself. That is not true. You still need to choose what is inside. You also need to check your room. Do not over-contribute. Over-contribute means putting in more money than your room allows. That can lead to a tax penalty. That surprised me. I thought more saving was always safe. In a TFSA, the limit matters. For example, if you save $20 a week, that is a general example. It shows a small, steady habit. It is not a promise about my own money. The habit matters more than the size.

    What I Do Now
    Now I start with one step. I check my contribution room first. I can check it through the Canada Revenue Agency, or CRA, My Account. I keep my own simple record too. I write down what I put in. I do not rush. I ask questions at the bank if I am unsure. I read the Canada.ca pages slowly. I do not copy what a friend does. My room and my goals are my own. I start small. Small is fine for a student.

    Final Thoughts
    A TFSA is not magic. It is a tool. It can help your money grow without tax on that growth. But you need to know your room. You need to avoid over-contributing. And you need to know that a TFSA is an account type, not an investment itself. If you are a student, learn this early. Take one small step. Check your room. Ask a question. That is how learning starts.

    Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

    Sources: Government of Canada, Canada.ca – Tax-Free Savings Account (TFSA): https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html

  • What I Learned About My First Paycheque as a Student in Canada

    What I Learned About My First Paycheque as a Student in Canada

    Introduction
    I still remember my first job as a student in Canada. I was excited. I counted my hours. I thought I knew what I would earn. Then my first paycheque came. It was smaller than I expected. I felt confused. I felt a little disappointed too. I did not understand why. Now I do. This is what I learned.

    What I Learned
    Gross pay is the money you earn before anything is taken out. Net pay is the money you actually receive. Net pay is smaller. That is normal. The difference is deductions. A deduction is money taken from your pay before you get it. In Canada, three common deductions are tax, CPP, and EI. Tax is money that goes to the government. It helps pay for roads, health care, and schools. CPP means Canada Pension Plan. It is a plan for retirement. You pay a small part now. EI means Employment Insurance. It can help workers if they lose a job. These deductions are not a punishment. They are part of working in Canada. A pay stub is a paper or online record of your pay. It shows your hours, your gross pay, each deduction, and your net pay. I learned to read it line by line. That helped me a lot.

    A Mistake or Surprise
    My mistake was simple. I only looked at the final number. I did not look at the pay stub. I thought something was wrong. I thought my boss had made a mistake. In fact, the deductions explained the difference. The surprise was how normal this is. Many students feel the same shock. I wish someone had told me earlier. For example, if you save $20 a week, that is a general example. It is not my real pay. It just shows how small amounts can add up over time. The main point is simple. Do not plan your spending on gross pay. Plan on net pay.

    What I Do Now
    Now I check every pay stub. I look at my hours first. I check my gross pay next. Then I look at each deduction. Then I check my net pay. If something looks wrong, I ask. I ask my employer in a polite way. I also keep my pay stubs in one folder. I do this on my phone and on my computer. I try to save a little from each paycheque. Even a small amount helps. I do not spend money I have not received yet. That rule keeps me calm.

    Final Thoughts
    My first paycheque taught me a big lesson. Money at work is not just about hours. It is also about deductions. Gross pay is not the same as net pay. Tax, CPP, and EI are normal parts of pay in Canada. Reading a pay stub is a skill. It is a simple skill. It can save you worry. If you are a student, start with your next pay stub. Read it slowly. Ask questions if you need to. Learning this early makes money less scary.

    Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.

    Sources: Government of Canada, Canada.ca – Pay, deductions and payroll information: https://www.canada.ca/en/services/taxes/payroll.html