The Canadian Press - ONLINE EDITION

Is taking a gap year after high school a smart financial decision?

  • Print

TORONTO - Is there value in a "gap year" after high school?

That's the question Jonathan Nikodem faced when he graduated and weighed the financial and personal benefits of taking a year off before university to consider his options.

"I just had no idea," the 21-year-old student said of his post-secondary career. "I thought that I wasn't ready."

Sentiments like those are enough to throw many parents into a panic about their children's future, but financial advisers say that putting school aside can offer rewards to some young Canadians, if they craft a proper investment strategy.

"It's a huge risk ... You could potentially put yourself in a situation where you wasted a year," said Christopher Dewdney, a financial advisor at DWL Financial Services in Toronto.

"You want to make sure you're going in the right direction."

On the flipside, spending a year in university for a program that you wind up hating can be like throwing money in the trash.

It's a factor that Nikodem took to heart when he decided to stick around his hometown in Sudbury to work at his mother's gift shop. His goal was to raise enough money to eventually live independently in Toronto while going to school.

Not every young person is quite so diligent when they take on a full-time job, said Dewdney, which is one reason that a "gap year" can be dangerous.

"It's easy to get tempted, and use that money to go out, buy clothing and have fun," he said.

"The lion's share of the funds should be invested."

Of course, before there's any money to invest, you need to have secured a full-time job before graduation, in order to avoid wasting time. Many graduates leave the job hunt until after school is finished, which means they're competing with a big crowd of other unemployed young people who are looking for summer positions.

Dewdney suggests that once you find a job, you should set up an automatic withdrawal to save about 60 per cent of your paycheque in an account that you can't touch.

"Because you're dealing with such a short time horizon, you should be looking towards fixed-income style investments," he said.

"It wouldn't really make sense to introduce you to a more volatile investment."

High-interest savings accounts, government and corporate bonds, GICs and conservative mutual fund portfolios are suitable considerations, Dewdney said.

Tax-free savings accounts are also a smart vehicle for short-term investments and allow Canadians, 18 and older, to stow away up to $5,500 per year without being taxed.

Students should also utilize the "gap year" to its fullest by staying with their parents to minimize living expenses and maximize savings.

Use that time to test your ability to survive on a tight budget, said Robert McCullagh, an advisor at Benefit Planners Inc. in Calgary.

"Get yourself clear on what you have to live on," he said.

"If you're going to have $2,000 a month for expenses ... do a dry run to see if you need additional financial resources, which might include grants, scholarships or student loans."

Amid all of the newfound responsibilities, it's tempting to give into the lure of exotic vacations or European backpacking trips that you might not be able to afford. If you have the passion to travel, but still want to save, set aside money dedicated solely to exploring, but don't go beyond your limits.

Nikodem put a financial cap on travel plans with a friend, and decided to visit South America for a short time and tour parts of Canada.

"I didn't want to waste all my money travelling," he said.

Regardless of your specific approach, a "gap year" also provides the opportunity to establish an emergency fund for school.

For Nikodem — who ultimately decided to take two years off before he enrolled at Ryerson University in Toronto — the fund gave him some leeway when securing a part-time job in the city proved more of a challenge than he expected.

All things considered, Nikodem said he's glad he didn't dive into more schooling before he was ready.

The extra money saved meant he was able to rent a downtown apartment within walking distance of the university and it also let him take a bit of time off while he eased back into academia.

But he said not all of the lessons of the "gap year" were tangible.

"It was the whole growing up thing that I took away the most," he said, while considering what advice he would give to other upcoming graduates.

"Don't rush into a program," he said. "You're only 18, you're really young. Just keep your eyes open."

— Follow @dj_friend on Twitter.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Lindor Reynolds speaks candidly about life with terminal cancer

View more like this

Photo Store Gallery

  • A Canada goose protects her nest full of eggs Monday on campus at the University of Manitoba- Standup photo- Apr 30, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • Ruth Bonneville Winnipeg Free Press January 18, 2011 Local Standup -

View More Gallery Photos

Poll

Do you support Pimicikamak First Nation's protest against Manitoba Hydro?

View Results

View Related Story

Ads by Google