In the UK, it is well-known that students attending University are eligible for government-funded loans to support them during their studies. In fact, the typical student receives £2,094 each term.
However, new research by MoneySupermarket has revealed that on average, students have a shortfall of around £142 each term, leading to 85% having to rely on additional sources of income for support. For many 18 year olds, university is the first time they are managing their finances independently, and it can also be the first time when they’re managing thousands of pounds. Yet, has this study proved that students are given too much independence?
It’s a common assumption that students spend too much on going out – and indeed, the study found that nights out were students’ third biggest outgoing, costing £46.10 on average per month. However, compared to the average cost of accommodation – over £450 – this does not seem so execessive.
If students were to give up nights out, travelling back home to visit family, new clothes, gym membership, alcohol, eating out, and other social activities, they would save £550.68 per term on average. It depends on whether these activities are seen as part of a student’s experience of university life, or unnecessary costs.
Students estimate they’re spending an average of £112 a month on non-essential items. Research shows that it’s actually £220 on average – nearly 2 times their estimate.
Students mostly use their overdrafts to buy groceries (61% of students), rent (48%), and bills (28%). But almost a quarter (23%) are also using them on nights out and 13% are spending them on clothes.
Whilst it’s easy to judge students for what they choose to spend their money on, the reality is that many are under constant financial pressure. According to MoneySupermarket’s survey, 1 in 3 students worry about money daily. This is a huge proportion, especially as the purpose of this stage of their life is centred around their education.
42% of students have a part-time job to contribute to their income – a further reason for concern if it’s taking time away from their studies, but they feel obliged to use this time to earn rather than to learn.
Many students also use an overdraft to help subsidise their student loan. Overdrafts put students automatically in a position of debt, and can be hard for them to get out of when outgoings feel like a continuous cycle. 42% of students regularly dip into their overdrafts at an average value of £548, while 6% are more than £1,400 into their overdrafts.
What can be done?
Here are five tips to students struggling with their finances:
- Get the largest zero per cent overdraft – Many student accounts offer a zero per cent overdraft, but be sure to note that they’re only interest-free for a few years after graduation, so keep an eye on this to avoid unnecessary charges.
- Student Discount and Perks – Various shops and restaurants offer student discount to those with a valid student ID, you can get exclusive offers from NUS or UNIDAYS. A select few student bank accounts offer free railcards or interest-free credit cards, as well as a number of other incentives when you sign up.
- Calculate your expenses – Whether it’s an app, a diary or scrap piece of paper – tracking your incoming and outgoings can really help identify where you spend unnecessarily. Try logging your main costs down and avoid impulse buys!
- Lowering the Value – You might be used to brand names, but simple changes such as value brands can help save the pennies! Shopping in a local butchers or green grocers can help minimise the costs too – or swap your Sainsbury’s for an Aldi or Lidl.
- Speak to someone – If you feel like you can’t manage the financial pressures, there are a number of people around to help. If you’re not comfortable speaking to a family member or close friend, many universities offer a wellbeing adviser that can help you get back on track.