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Should medical residents start saving or pay down debt?


Most medical students in Canada today will finish school and enter residency with debt, with 42% of students reporting debt of $120,000 or more.1

Residency is often the first chance for physicians-in-training to start thinking about paying down debt versus accumulating more. Salaries for PGY-1 are in the mid-$50,000 range, and so depending on where you live, it is possible to pay down debt and save.

When you meet with your financial advisor, you will likely go over these things:

  • Your financial picture: what you own and what you owe
  • Your monthly spending: what you earn and what you spend
  • Your short-, medium- and long-term goals

But before you have that discussion, there are some important things to think about: 

1. Recognize your feelings toward debt

  • Not worried at all: you can manage your debt now and later
  • Slightly uncomfortable: you’re used to it
  • Anxious: you can’t sleep at night

Your feelings about debt are a factor in your decision. If being in debt makes you uncomfortable, even if the math suggests the return on saving and investing will be greater than the interest costs on your debt, there’s nothing wrong with paying down a portion of your debt first.

2. Understand the benefits of each choice

Benefits of paying down debt:

  • Pay less interest over time
  • Free up funds in the future for other goals
  • Increase your net worth

Benefits of saving and investing: 

  • Because physicians generally don’t have pension plans or other retirement benefits, it’s better to start saving sooner rather than later to give your money more time to grow (Learn more about the benefits of compound growth).
  • Get into the habit of “paying yourself first” now so you’re on autopilot in the future. There will be other financial complexities to deal with as a practising physician.
  • Take advantage of the time you’ve got to ride out the ups and downs of the market.
  • Enhance your investment knowledge.

3. Understand the nature of your debt

  • credit cards: because of the high interest rate, it’s best to pay these off as soon as you can
  • Line of credit: a medical student and resident line of credit typically charges the prime rate (currently 2.45%), while some lenders will offer prime minus 0.25%; the rate may increase significantly once you have completed residency
  • Student loans: you are not charged interest on government student loans until you finish medical school; once you start paying interest, you can claim a tax credit on your income tax return

Understanding the basics about the nature of your debt and your feelings about it, as well as the benefits of paying down debt and investing, can give you more confidence when you start making decisions about your financial plan.

Case study: How to decide on your strategy

Let’s look at this fictitious example of Nadia2, a new physician in her first year of a surgical residency.

When Nadia sits down with her financial advisor, they go over questions about her feelings about debt.

She feels comfortable with her debt and expects to pay it off over time. For now, her focus is to save and invest, as she knows that some life transitions are on the horizon, including getting married, buying a home and having children within the next five years.

Here’s her financial picture.

Nadia is advised that to keep her plan flexible, it would be best to split the allocation of her monthly surplus equally to her line of credit and investment.

Nadia decides to regularly save $200 of her income to a tax-free savings account using a pre-authorized contribution plan. She also decides to use the other $200 to pay down her debt every month. She is already making the minimum debt payments on her student loans and line of credit ($600).

The combination of paying down her debt and starting to invest makes Nadia feel good that she is moving in a positive direction financially. Having the discipline to both save and pay down debt will also show whichever financial institution she borrows from in the future that she can manage her finances.

Paying down debt and saving can be complementary

Should you use your money to invest or to pay down debt? Your answer depends on a number of individual factors, such as your goals, your debts and your approach to money.

An MD Advisor3 will help you get clear answers and a personalized strategy, help you organize your debts and give you practical advice on how to pay them off sooner.


1 Includes non-student loan debt. See The Association of Faculties of Medicine of Canada, Graduation Questionnaire National Report 2019, at

2 The hypothetical case study is for illustrative purposes only and does not represent actual clients. Any resemblance to actual people or situations is purely coincidental.

3 MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

Banking and credit products and services are offered by The Bank of Nova Scotia “Scotiabank”. Credit and lending products are subject to credit approval by Scotiabank.

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.