If you’re a student or graduate leaving home and becoming financially independent for the first time it can be as much fun as it is a massive reality check. Here are a few hints and tips on keeping on top of your money and helping you think through some of your choices..
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The reality for most students is that you’ll build up significant debt while in further education. In fact, the average student debt is now over £30,000*. Make sure that if you have to take on debt you try and choose the lowest interest rate available. Student loans tend to feature low interest rates and how much you pay back depends on how much you earn once you graduate.
*Source: Lloyds Banking Group Research 2015
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The rule with debts is simple: pay off the one with the highest interest rate first. If you have a credit card try to pay down any outstanding balance each month rather than just the minimum amount. You may even be able to transfer an outstanding balance onto a lower rate card and cut your interest charges - helping you to pay if off a bit quicker.
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It's often really easy to get carried away and end up spending more money than you were planning to. Why not create a budget planner and work out your living costs, rent, clothes, food, travel, and how much you’ll have left over to give yourself a treat or two. If you use our Internet Banking, why not give our Money Manager service a go, as it’s a free budgeting tool that'll automatically help you keep track of your day-to-day spending and saving.
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Your credit history acts like a CV for your finances and it starts as soon as you take on banking and insurance products. As a student it’s important you make any credit payments you have on time to help build a good credit score for later life. A credit score is not just confined to a loan, mortgage or credit card, as it can also influence your ability to get a mobile phone on contract, pay your car or home insurance monthly and even which bank account you can get. It's worth checking your credit files annually, and certainly before you apply for a major credit product like a mortgage. Try one of the popular credit rating agencies such as Experian, Equifax or TransUnion to review your credit profile and to make sure it’s correct.
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By organising the way you spend and save money, you’ll be able to take greater control of your finances. Why not try the 50-20-30 rule. All you need to work out is your monthly income, or your budget if you have a student loan. The first 50% of your income goes on essentials including housing, food, utilities, transport and clothing. The next 20% goes towards long-term savings and payment towards any debt. The final 30% goes towards those non-essential lifestyle choices including things like your hobbies, TV package, entertainment and holidays. It’s often hard to stick to these percentages, so you could over time make changes to suit your own circumstances and financial position.
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What happens when you finish your working life isn’t exactly going to be top of your list of priorities right now, but the sooner you start saving for retirement, the more money you’ll have in later life. The good news is that by 2018 all companies in the UK will have to offer a pension to their employees and many will make additional contributions, as will the Government. Before you start a new job, ask your prospective employer about their employee pension arrangements. As always, if in any doubt seek professional advice.
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