As the autumn term gets underway and the latest crop of students settle into university life, many will be getting their first real taste of what’s great - and not so great - about living independently.
While this dawn of a new era is crammed with excitement, it’s also a time when young people make money mistakes — some of which will have repercussions lingering way beyond their student years.
One of the best — and least costly — ways to avoid a financial mistake yourself can be to learn from those who have already made one.
A recent Gocompare.com Money survey talked to students who are now embarking on their second, third and fourth year at university, and found that nearly half don’t think they’re managing their finances well. Only 53% of the 1,000 students surveyed were happy with the way they’re managing their money and nearly one in five (19%) were “seriously worried” about the state of their finances.
New research from the Money Advice Service (MAS) confirms how adulthood can be a particular flash point for people making serious financial blunders. The Service has just published a report detailing the “explosion” of choices people are faced with when they turn 18, suddenly finding offers of everything from new accounts to credit cards and payday loans dangled in front of them.
The report lays bare the long-term consequences that a “spend today, worry tomorrow” attitude can bring. In one case, a young man named “Harry” (people’s real names were changed), told how he had bought a car to “impress the girls” using a student loan, but ended up gathering several thousands of pounds worth of debt after the car developed numerous problems. In the end, Harry’s financial difficulties led him to drop out of university, take on three jobs and move back in with his parents.
This may sound like an extreme case, but financial mistakes in early adult life are very common.
In the MAS survey, s ome 72% of people in their 20s had made some sort of money mistake which they later came to regret — and 60% of people in their late 20s said their biggest money mistake happened between the ages of 18 and 22.
The age-old student tradition of spending too much money on a night out topped the list of financial blunders, closely followed by blowing the budget on take-aways and ready meals — so i f you’ve got housemates, now might be a good time to draw up a cooking rota, as sharing meals should help keep to costs down.
The research also found that one fifth (20%) of students had let their new-found financial freedom go to their head by making too many impulse purchases, so writing out a budget could also help.
Picking the right student account for your needs can be key, too. One in seven (14%) students surveyed said they’d gone with the wrong bank account. Focusing on how you use your account rather than any up-front perks can prove vital, with one in nine (11%) students admitting they went for the best freebie rather than the best student account. Thinking about how you can keep down any borrowing costs to a minimum is also a must, with debt commonly cropping up on students’ lists of regrets.
The Gocompare research also found that 8% of students dipped into an unarranged overdraft, potentially leaving them open to punishing charges.
Meanwhile, 10% had over-spent on their credit cards, and a worrying 8% ignored credit card payments which were due and incurred penalties as a result. This can leave blots on credit histories which students will still be affected by after they graduate.
But not all students are the same, and some score much higher marks when it comes to managing their money.
Unsurprisingly, maths, accountancy and finance undergraduates were found to be the most confident with their money skills, with 65% believing they manage their finances well. Language students, including those studying English, were found to the least confident, with just 43% seeing themselves as good with money.