If you are starting university you may be worried about your finances. Good. A little financial fear is called for at times like these.
It’s understandable why student money management is so difficult. Starting university is an exciting time. Many students will live alone or with flatmates for the first time. Students are often in a new town or city, so there are new places to go and things to do. Additionally, students are often given a large sum of money from student loans without any real guidance on how to spend it wisely.
With all of the change and opportunities, it’s easy to lose control of finances. Especially if this is a student’s first time living in a financially independent or semi-independent setting.
Against this backdrop, financial mistakes are a near guarantee. But university is also an important time to learn a few good money saving habits and the basics about managing money. These lessons can help students avoid big financial mistakes, navigate student debt and help with financial security for a lifetime.
Without further ado, here are some of the common money mistakes students may encounter, and how to avoid them.
1. Not setting a budget
We all like to treat ourselves to nice things, big nights out, late-night taxis home, nice meals, gym memberships, and so forth. That’s fine if done in moderation.
The rule of thumb is not to live beyond your means. If you’re new to managing money and living on your own, it can be more challenging to establish a budget baseline and knowing when you have gone overboard. Some may go for the “winging it” or “trial and error” approach, but this can quickly lead you towards financial hardship if you judge wrong.
The best thing you can do when budgeting for university is to decide on a student budget and check in on it often. A free money tracking service like Money Dashboard can make this easy. The service can help you calculate what your budget should be, and the handy phone app makes it easy to see how close you are to reaching your limit in real-time. After a few months (or longer) it will become easier to establish healthy financial habits suited to your income.
Sticking to your budget and learning to manage your student loan spending is not only a good habit for university: you will use the principles of budgeting and smart spending for the rest of your life.
2. Having too many non-essentials in your budget
When you first start university, some things feel like a must. A yoga or gym membership. Friday night pub nights and covering rounds for new friends. Taxis home at the end of the night.
Take a minute to reassess your student spending. There are these really essentials? Are you getting value for money for these expenses? Could you be substituting them for cheaper alternatives? Could you drop some completely? Could you change your habits to make even small purchases like a morning coffee at the café less “essential” by brewing it at home before you go to class?
It’s hard, I know. And unfortunately it doesn’t get much easier with time. But discipline is important. Weeding out the extras from your budget helps you meet your financial goals and stay afloat not just in university, but also throughout your adult life.
3. Falling into credit card debt and always spending from your overdraft
University is the first time many people will have a student credit card or access to a student bank account with an overdraft. Be careful. Spend too much in a month and you risk moving into overdraft and falling behind on payments. These things cause big damage to your credit score.
You may have never thought about your credit score before, but it’s time to. Consider your credit score as a grade for your financial habits. The university isn’t scoring you, but the UK’s three credit agencies are. Your score will impact your future ability to take out loans, open accounts, get better deals on credit cards, get a flat with cautious landlords, and could even cost you job opportunities.
Additionally, you may create long-term debt issues for years to come. It is very hard and it takes time to escape debt, especially as most credit card companies charge a high interest on debt. It’s better to avoid it altogether. Only buy what you can afford.
4. Not taking advantage of student discounts
You live and learn. And one regret post-grads often share is not having made enough use of student discounts. This is a financial mistake you can avoid.
Lots of places offer them and they can be substantial. It’s always worth checking before you make a purchase, and selecting stores that offer discounts instead of paying full price elsewhere.
5. Not applying for financial support
University life is expensive. Student expenses add up fast. Fortunately, you don’t have to pay for everything out of your pocket right away. You can get a helping hand through the UK’s benefits system.
You may be eligible for two types of government loans or grants. One is called a Tuition Fee Loan to help pay for university fees and the other is a Maintenance Loan (or a maintenance grant) to help with the cost of living. For the 2020-2021 academic year, you can take out a Tuition Fee Loan up to £9,250, and a Maintenance Loan up to £10,539, depending on your living circumstances.
If you are on low income, have a child, are disabled, or have other challenging circumstances, you may be entitled to additional money. Many universities also offer bursaries or scholarships (which don’t need to be repaid) to students fulfilling certain requirements.
You start repaying the loans once you start earning an income over a certain amount. As long as you keep up payments when you are required to pay, loans should not negatively impact your credit score.