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For many students, moving to University is their first experience of managing their own money without the guidance of their parents. Whether they still get an allowance, or have a part-time job to generate some income, learning how to budget this money effectively is a steep learning curve – especially considering it’s a topic that’s frequently left out of traditional education syllabuses.
However, learning how to manage finances, set up credit cards, and be aware of how credit can impact many of their financial decisions is extremely important. We don’t believe that finances
should be something students shy away from, so in this article, we’ll be diving head-first into the topic of why proper financial education is so important, and how students can effectively manage their money and credit pre- and post-graduation.
Why Financial Education is Important For Students
As you grow up, the amount of responsibility you feel also increases. No longer is it up to your parents to look after you and make sure everything you need is provided, it’s up to you to sort things out yourself. Because important financial literacy skills aren’t taught in school, it’s not uncommon for students to struggle to manage money for food, rent, bills, and social activities with their friends.
The earlier that students start to learn about finances and get actionable guidance on how they can manage their own money, the easier it will be for them to make wiser financial choices in the future. Whether it comes to taking out loans, getting credit cards, budgeting, or just understanding how interest rates work, financially literate students can avoid common financial problems and work towards creating a strong financial foundation for themselves that will set them up for the rest of their lives.
What is Credit Management and Why Should Students Know About It?
Credit management is about controlling credit; money that is borrowed and is expected to be repaid. As you get older and start taking out loans – like student loans, getting a credit card, or planning for a mortgage – you start to build up credit for yourself which is an important indication of how trustworthy you are to lenders. If you have a poor credit rating, you are less likely to be granted large loans from banks or other financial institutions, whereas if you have a good credit rating the process of getting a loan may be a lot simpler.
Students may not be planning on making any large investments, or even considering a credit card just yet, but that doesn’t mean it’s not important to start thinking about how you can manage and grow your creditworthiness.
It’s important for students to have a good grasp of credit management so:
♦ They can avoid getting into large amounts of debt that can lead to crippling financial stress
♦ Gain financial independence from their parents so they can start to prepare for life’s big purchases like a house, renting an apartment, or buying their first home
♦ Build a good credit history early on in life to ensure favorable terms for loans, credit cards, mortgages, etc.
♦ Start planning for life’s long-term financial goals like retirement and starting a family
♦ Start building an emergency fund for life’s unexpected situations when you need to quickly access cash
Managing Your Finances During School/College
Before embarking on the exciting University journey, most students will find themselves anxiously waiting to see how much money they can expect from Student Finance. Although this is a loan that will have to be paid back throughout their lives, the more loans that they are provided, the more comfortable they will be financially throughout University.
This is probably the first major loan that you will ever take out in your name, meaning it’s your responsibility to pay back. This maintenance loan will cover a lot of your monthly spending, but most students will also need other ways to supplement their income to avoid getting into debt – this could come from parents, getting a part-time job, or taking a loan out from the bank. On average, graduates of English universities will find themselves in £44,940 worth of debt as they try to juggle the costs of tuition, living costs, food, books, and keeping up an exciting social life.
When you’re at University, the most important credit management tips to follow are:
♦ Create a budget planner every month where you can keep track of your income and expenses
♦ Avoid spending money on unnecessary purchases like eating out or going shopping
♦ Look into different grants and scholarships to help lessen your reliance on student loans
♦ If you do take out a credit card, only use it for daily purchases and pay off your balance at the end of every month to build a good credit score
♦ Stay away from buy now, pay later platforms that encourage you to spend money you don’t have
Managing Your Finances Post-Graduation
You may think that managing your finances during university is a challenge, but some of the biggest responsibilities come post-graduation. Not only do you have to worry about paying off your student loan, but you’re probably also paying rent, and bills while trying to become financially independent.
Once you have graduated from university, one of the first things you’ll want to think about is how you’re going to pay off your debt. Having debt on your shoulders can impact a lot of your major life decisions, bad credit could even prevent you from being able to rent an apartment. For this reason, working on paying off high-interest debt first is optimal if you want to improve your credit score. If you’re worried about your debt, it’s best to reach out to your University’s financial counselors who can advise you on the best route to beginning your debt-free journey.
This is the time in your life when you may start to think about getting a mortgage, building a business, or starting a family, all things that you may need to get guaranteed loans for and will rely on having a good credit foundation. The more work you put in early on to improve your finances, the more successful you will be in these larger financial activities.
Providing Access to Relevant and Up-To-Date Financial Resources
Because financial education in schools isn’t as good as many of us would hope, it’s important that young people are provided with a wealth of resources that can help improve their finances and teach them how to better manage their credit.
Popular websites like money saving expert are a good place to start if you have specific financial concerns and want to find information relevant to you, but it’s also important to speak to financial advisors if you’d like more tailored and relevant financial advice.
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