You have to feel a bit sorry for young adults heading off to university this Autumn. COVID-19 has certainly done its best to make life difficult for them. As well as having to complete their studies at home and endure lockdown, they’ve had to cope with exams being cancelled – not to mention missing out on all the end of year celebrations with their friends. It’s certainly been a challenging time.
That said, perhaps their hardest challenge is yet to come. As they assert their independence, they’ll have to learn how to manage their money – and manage to make it last for a whole year! If you have a child or grandchild going to university shortly, here are our top tips to help them on their way.
It’s all in the budget
The latest National Student Money Survey shows that 79% of first-year students struggle to make ends meet – and spend time worrying about it. It’s probably not surprising. For many young people, it’s the first time they’ve had to shop for themselves, pay bills or buy their own drinks. And when they see a big chunk of money land in their account courtesy of their student loan, it’s very tempting to have fun and splash the cash.
The first lesson they need to learn is how to budget (and stick to it). Encourage them to look at what money will be coming in each term, either through their student loan, or possibly the bank of mum and dad. Then work out what needs to be paid out for accommodation and bills. That will leave them with a clear picture of how much is left to spend. With some bank accounts, you can set up separate pots for bills, savings and spending, so you can easily switch money from one to the other – and see at a glance if there’s enough cash for a kebab on the way home.
Don’t go overboard on the overdraft
Most student bank accounts will offer an overdraft facility, usually for around £1,000. It’s easy to understand why these are popular. It’s almost like being given ‘free money’, especially as most offer interest-free lending all the time you’re at university. So what could possibly go wrong?
An overdraft can be a great back-up, helping students pay for things before the next chunk of student loan comes in. The problem is that once on the slippery slope to borrowing, it’s easy to get carried away – and forget that at some point it needs to be paid back. The Money Advice Service says there should be more guidance for students before they’re offered this ‘free money’. Especially as four in ten students say they’ve gone over their agreed limit or gone into an unarranged overdraft, often leading to hefty charges. Forewarned is forearmed.
Pop it on the plastic?
When you become a student, you might also be offered a credit card for the first time. Only 14% of students choose to go down this route, and that’s probably a good thing. Although they can come in handy, The Money Advice Service found that in 2018, 176,000 students missed a credit card payment or paid it late for three months or more. If you only have a limited amount to spend each month, having to make a repayment on a credit card too will hit you hard.
Having a credit card can also make life difficult even after you’ve graduated. Why? If you miss a payment or don’t pay on time, it can seriously affect your credit score. And that could make it really tricky to get a secured loan, mortgage or any other sort of credit in the future. So, before your young adult flies the nest, it’s worth having an open and honest talk with them about how credit cards work – and the implications they can have if not managed properly.
What they don’t teach you at school
Being able to manage money is one of the most important life skills, yet 77% of students say they wish they’d received a better financial education before starting university. You can help them prepare for this next exciting stage in their life by giving them some financial help and advice when they need it most.
You may need some advice too. Supporting a student through a degree can be expensive, especially if you want to minimise the amount that goes on their student loan. If you’re planning on paying their tuition fees or regularly topping up their money, Citywide can help you find the most effective way to do that. Just get in touch. We’ll be happy to help.