The main reason we go to university is to learn about a topic that we have an interest in, from business and law courses to fashion and music, there’s a course and career path for everyone. Another thing we hopefully learn at university is how to handle our money – for most it will give you your first lesson in managing finances. Juggling costs such as rent and utility bills, a large amount of social events and paying for the train home at Christmas, there’s a lot of financial considerations to keep in mind when living the student life.
Student finance doesn’t have to be all doom and gloom. There are plenty of positives you can take from this type of loan which will get you ready for a future of financial planning. Today, we’re going to be covering how you can take your student loan and learn financial lessons that will set you up for the future.
Paying back debt
The question when you start university isn’t whether you’ll get in to debt, but rather how much you’re going to get in to. Many students now face annual fees as high as £9,000 and that’s before you’ve taken maintenance loans into consideration and added up the total that’s been racked up over a minimum of 3 years. The average debt a student is now likely to leave university with is thought to be above £50,000.
The actual paying back of your student loan isn’t that hard. It’s an automated system that kicks in once you’ve started earning over a certain amount of money which is dependent on the year you started your course. How much you pay back on a monthly basis is then a percentage of your wage before tax and other deductions, making it easy for you because you don’t have to do much apart from budget for the repayment.
You may feel like you’ve spent a large amount of your student years avoiding extra debts from piling up or constantly thinking about owing money here, there and everywhere – this is where the life lesson comes in. You’ll have a greater appreciation for money now and know how to stick to deadlines of repaying or knowing the best ways to avoid getting into unsafe financial positions.
Understanding the financial world
The finance industry can be overwhelming for someone experiencing it for the first time, especially when you have banks offering you freebies such as travel cards and cash back deals to hook you in, but in reality, these often aren’t the best long-term financial options.
Up until now, the most common financial consideration you’ve probably had to make and pay attention to is your overdraft. Overdrafts are offered on many student bank accounts and can seem extremely attractive. With overdrafts comes potential high interest rates, so if you were interest rate savvy at university, you’ll have learnt a lesson for life – how to shop around for the best bank account or loan. In years to come, you’re going to face plenty of loan applications, whether these involve taking out a mortgage or buying a car, you’ll be aware of the best interest rates and less likely to be sucked in by the incentives.
Another key learning is how to shop around. Again, if you’re savvy, it’s not unlikely that at you changed bank accounts while at uni, and opened new ones to receive the best deal possible at the time. The same approach can be taken with your utility bills when you move into your first non-student home. Shopping around and changing providers can often save you money and will give you opportunities to make the most of incentives without suffering from the interest rates.
Learning to budget
If you were lucky enough to find yourself at uni without ever having been financially responsible beforehand, budgeting most likely became your best friend. With so many new things to pay for such as rent, bills (groceries, phone contract, water, gas and electricity), social events, travelling home and more, a budget would have been a must-have so you could track what your student loan or part time job was paying for.
Budgeting has more than likely left you with money management skills for life. Depending on what you choose to do in life after university, you’ll no doubt have to budget again – whether you’re moving back home for a while to save money, going travelling or heading straight into full time work. Use your experience to write down a list of budgeting tips to live by – your future self will thank you for it!
If you’re keen to understand your financing even more and want to know how to make your money go further, dive into our other Jolly Good Loans blog posts for even more tips and ideas.