Money mistakes can be costly, both in terms of pounds and pence, and in terms of lost opportunities. But how do we know which mistakes to avoid? Every day, it seems, there’s a new financial challenge to battle with, especially as a student. Fortunately, some of the most common financial faux pas, such as diving too deep into an overdraft or not budgeting well can be easily avoided with a little knowledge and foresight.
In this article, we’ll explore four of the most common costly mistakes students make and how to avoid them. With the right knowledge, smart decisions and a little planning, you can become confident with your spending.
1) Not taking advantage of student discounts
With apps like Student Beans and UNiDAYS, students are surrounded with opportunities to save money. There are discounts ranging from travel and lifestyle to food and fashion- most things you could think off have a student discount available at the click on a button. Missing out on discounts leads to your budget becoming smaller- by researching places and brands that offer student discount allows your budget to stretch that little bit further. This is a common mistake students make, as they aren't made aware of the discounts; with a little bit of research, so much money can be saved.
2)Not budgeting effectively
"Most students report that money doesn't stretch far enough. The average student receives just £485 a month from their Maintenance Loan, which falls £439 a month short of covering the average living costs (£924 a month)."
Budgeting has been proven to be effective in money saving for everyone, not just students. By taking the time to create and stick to a budget can ensure that you are not overspending. There is a belief that budgeting involves a person completely cutting back and spending little to no money, but it is also about planning for the future and setting aside money to benefit you in the future. The stigma around students who budget have less fun needs to be abolished- its clear to see that fun and happiness has no monetary value.
The best way to budget:
- List all expenses (for example rent, weekly food shops, leisure activities)
- Add up your total income monthly/weekly
- Subtract the expenses from the income
This way, you can clearly see how much money you have remaining each week/month. The key to budgeting is sticking to it; it may be tricky to begin with as its something not everyone is used to, but you will soon see the fruits of your labour. Apps like Emma allow you to clearly see your spending and set budgets- making it super simple and stress-free for busy students.
3)Not learning about student banking
Before starting university, it is important that you research the different student bank accounts and the incentives they offer. This means you can find one perfectly tailored to you and your needs. When comparing student bank accounts, it’s important to look at the fees associated with each. Some banks charge higher fees for student accounts, so be sure to compare the fees and select the one that offers the lowest cost. It’s also important to look at the interest rates associated with the accounts. Some accounts offer higher interest rates on savings, which can help you grow your money faster.
4)Not utilising student finance to its full potential
Every student is eligible to a form of student finance. This could include loans, grants, bursaries or scholarships. A lot of students are unaware they are entitled to extra finance sources, leading them to possibly struggle financially. The government website allows you to apply for student finance, this should be done before starting the academic year to ensure everything can be reviewed and finalised. Whilst it may be tempting to make reckless purchases or go on a spending spree when your installment of student finance comes in, to ensure full financial security its recommended you budget (like mentioned above) to ensure you still have money to cover fixed costs like rent.
"Two in five students don't understand their Student Loan agreement. On top of this, over 60% worry about paying it back"
Students should never worry about fully utilising the student loan offered to them as it gets paid off over a long period of time if you earn over £27,295. It is never paid off in big installments, it is repaid through the tax system and a lot of people don't even realise its being deducted as its not small percentage of your earnings.
Now that we have covered the main faux pas, here are some top tips for students to fully utilise their income to avoid making costly mistakes:
- Start budgeting sooner rather than later: you want to be saving as much money as possible.
- Do your research! There are so many ways for students to save money and get other forms of income.
- Look into part-time work to ensure money doesn't become an issue.
- Every little helps: often students are offered 'freebies' and discounts which help them save money (for example: free clubbing tickets or discounted food delivery services).
- Avoid impulsive purchases: really try to rationalise whether an item is worth the money.