Students aren’t generally expected to be the best at money management – with loans, interest-free overdrafts, and numerous discounts to tempt them into spending -  but new research has found that students feel quite capable in managing their finances – with 73% stating they felt confident in doing so.

However, this confidence isn’t quite translating into real life, as 38% of students have some form of outstanding debt aside from their student loan, with just under one in five owing £1,000 or more.

Research was conducted by the Money Advice Service in partnership with the National Association of Student Money Advisers. The survey had over 5,000 respondents, all of whom were full-time undergraduate students in the UK.

Students are good at being thrifty – saving money from their maintenance loan or a part-time job – with eight in 10 students saying they have savings in the bank. This is something to be proud of, as recent data from Finder discovered that most millennials prefer to spend than save, with almost 1 in 5 impulse shopping every day.

Separate data from the Money Advice Service found that 9 million adults in the UK find themselves borrowing money regularly just to buy food or pay their bills.

However, there are some students who are relying on shorter-term solutions just to get by and are sadly falling behind. 176,000 students have fallen behind or missed payments on their ‘study costs’ university accommodation, credit card, bills or other debts in the last six months. 6% of students have turned to short-term borrowing such as payday loans just to get by.

Student Groups

Research was conducted by NASMA and the Money Advice Service to determine five different groups of students, each with different money situations and different ways of coping.

The groups were determined by expanding on existing research by the Money Advice Service into segmenting the UK’s population.

The five student groups are:

  • Supported and Sensible – Students from the most affluent background, with limited financial experience and a responsible attitude.
  • Confident and thrifty – Students from the least affluent background, with extensive financial experience and a debt-averse attitude.
  • Inexperienced and at risk – Students with an average level of affluence, with almost no financial experience and a well-intentioned attitude.
  • Anxious but spending – Students from an averagely affluent background, with moderate levels of financial experience and an often-heedless attitude.
  • Disengaged but overwhelmed – Students with average affluence, moderate financial experience, and a fatalistic attitude.

The student groups show that there are varying attitudes to money within the UK’s student population. It’s the latter three groups who need support and advice the most.

What can be done to help?

Students are great at feeling confident in managing their money and saving, but more needs to be done to raise awareness of relying on short-term solutions, and the danger of falling behind on payments. Universities, parents and friends can advise students to:

  • Consider getting a student bank account with an interest-free overdraft. It will be cheaper to pay off than a payday loan – just make sure that they stay within the limit. Credit unions have a cap on the amount of interest that they can charge, so they are another slightly cheaper alternative to payday loans.
  • Follow the Money Advice Service’s guide on whether they really need to borrow money.
  • Get them to sit down with a budget planner when their maintenance loan comes in and work out how it will last for the term.

Supporting students with their finances whilst they are in further education will help them set up better financial habits for life. Restrictive finances may be perceived to be part of the university experience but leaving university with debt that isn’t from student loans can leave a mark on student’s credit records.

The best way to prevent this is by offering support, advice, and resources to all students, not just those who are struggling to manage their money. 

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