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Students and money: who said this personal finance stuff is easy?


Today I taught undergraduates for the first time ever; yep, you heard me right. After over twenty years in universities, teaching Masters’ and Doctoral students, and doing research (funded of course, I have always had a knack for getting proposals funded) I finally got to do what requires considerably more mastery and teach young people fresh from high school. Well, most of them anyway.

So there I was, standing in front of 60 people aged between 18 and 22, coming from countries around the world (European countries, China, India even the US), and suddenly realising that I have been working at universities longer than they have been on this Earth. This did not send me on a midlife crisis downward spiral but made me think about something entirely different. Whilst talking about innovation and its social conditions (yeah, the course I am developing is on innovation and creativity) my personal finance blogger side switched on and this question started shaping in my mind:

How do these kids survive financially?

Well, I have to say that I simply can’t figure students and money. Short of the Bank of Mum and Dad seriously footing the bill that is, or the young people having jobs. Parents supporting their children through university may be generous but at the same time it brings forward a question regarding social mobility: this would mean that young people from poorer background would not be able to go to university. Being somewhat old fashioned I still believe in opportunities for social mobility and education is the most potent opportunity I know. There is nothing wrong with young people working through university but jobs are few at the moment and in university towns these will be very difficult to come by. But let me get back to the facts.

At the moment, students in the UK can apply for student loans that consist of two parts: a) tuition fee loans; and b) living expenses loans. For the current academic year (2012-2013) tuition fees went up to £9,000 ($14,500) per year. Living expenses loans are capped at £5,500 ($8,900) per year or about £2,000 ($3,200) more for students living in London. Let’s forget about London for the time being (hard to do I know but…) and do some maths.

This means that without parental help or working:

a student can count on £458.33 ($742.07) per month;

of this

student accommodation (average) costs £110 ($178.10) per week or slightly over £440 ($712.40) per month.

Now correct me if I am wrong but this seems to leave for living expenses (including books) the grand sum of £18.33 ($29.67) per month.

Impossible may be nothing but there is ‘impossible’ and ‘impossible’! This is of the latter kind. There is no doubt about it; at the moment young people in the UK will not only end up with £43,000 ($69,620) student loans debt over the course of their study but they can’t survive on that and need parents, jobs or both.

Note to readers in the US: students in the UK used to get grants to go to university and the systems is still adjusting; this is the reason students going to university today have no savings for that. My 11 year old son has a bank account known as his ‘university fund’.

This illustrates pretty well how personal finance is not really and not always simple. If we look at the seven core rules of personal finance, namely

  • Make sure that you earn more than you spend;
  • Regularly stash the difference away;
  • If you have ‘negative wealth’ make sure this is paid off;
  • Make sure that you have some reserves (savings) to offset unforeseen lean times in the future (and for peace of mind);
  • Make your surplus work for you and invest;
  • Never ‘play’ the stock-market; make long term investments; keep informed and hope for the best;
  • Buy bonds – lending to governments (some governments) is possibly safe;

…none apply!


Final words: When we think about students and money we tend to believe that the main problem they face when off to university is the one of financial management. Whilst this may be a problem, it is also true that there is hardly anything to manage.

How can personal finance enable students to take charge of their financial life (or survival)?

21 thoughts on “Students and money: who said this personal finance stuff is easy?”

  1. Getting through college is definitely tough if you don’t have support from your parents. I was lucky that my parents had paid half for my college and I paid the other half through scholarships, summer jobs and other odds and ends. I luckily graduated college debt free! Thanks Mom and Dad!

  2. In the case you described, I would ensure my degree is one that would ensure a job. I’d also fight hard for internships and work in the summer to offset costs. From what you wrote, there is no 529, education savings bonds, or ESA accounts in the UK system? 

  3. I may be able to shed some light on this one. I was at university in Central London when the grants were being phased out and large loans / fees were being phased in, and although I *just* squeezed under the bar re. graduating without a hideous debt burden, it was still a financially challenging time.
    I was on a full grant and one loan, which between them just about covered my living costs. My parents couldn’t afford to give me much support, but scrimped to send me £30 a week. So after my accommodation was covered, this £30 was what I had to live on: food, travel, books, clothes etc. etc…
    I lived very frugally. For example I lived in Zone 2 to save on accommodation costs, but instead of buying a travelcard, I walked everywhere. This often meant leaving the house early in the morning, but it was good exercise – and besides, London is so different and lovely when it’s quiet and peaceful early in the morning. I didn’t buy books new, but sought them out at second-hand bookshops and rented a few volumes long-term from the library. My clothes came from charity shops.
    I also worked several term-time jobs.
    The best thing I did was to work like a devil in the summer holidays. Students, of course, don’t have to pay tax. So when the summer came around I would stick around in London, sign up with office temp agencies and take on holiday cover assignments non-stop until term came around again. Good admin skills will go far in a busy city, and admin/secretarial roles paid around £250 tax-free (probably more now), which doesn’t sound like much but felt like a windfall to me back then.
    I wouldn’t go on holiday, but would save as much of that money as I could, to help cover my costs over the subsequent year.
    On another note, a decade after graduating I still have lots of friends who are still paying off their student loans from back. Student loans then were a fraction of student loans now! Students: start paying those loans down as soon as you can, little piece by little piece, or they’ll be hanging around your neck FOREVER.

    • @Miss Thrifty: Thanks for sharing and all you say makes sense. What I am thinking though, is that you could do this – working summers, two jobs in terms time etc. – when there was not an ongoing recession and in London. Have the feeling that the conditions have changed somewhat – with youth unemployment at close to 30% in the UK anyway jobs for students are probably not easy to come by. Mmmm? Need some research, this one.

      • Perhaps, but in London and other cities there will always be temps needed to cover support staff on holiday. What stood me in good stead was previous work experience – it was surprising how few students had this. Once I had admin experience under my belt, I was away.
        Although work for students is harder to come by at the moment, it is still there. Double glazing telesales. Temp care work. Nightshifts in a toothpaste tube factory. Not the nicest jobs, but if you need money badly enough, you’ll find them and do them (I did).
        I don’t want to come across as one of those annoying people who had a hard time and thinks that if they managed it then everyone else can too. But I do think that you are more likely to secure something – anything – when you’re desperate & driven. One big difference these days is that with tuition fees hiked so high, it’s now the norm to graduate up to your eyeballs in debt. The goal posts have moved – and expectations and attitudes along with them. Hate to say it, but if I was at university now, I think I would make more of a hash of my finances…

  4. You did not mention the maintenance grant up to £3250 pa for poorer households. Yes, better off parents are expected to contribute to student maintenance, a part of the intergenerational wealth transfer process that must inevitably happen.

    The new student finance system has been presented as a loan for political purposes but it functions more like a tax. 

    • @Salis: No I didn’t mention that; I was making a point of an ‘average’ student. Otherwise, we probably need to mention the grants for ‘independent’ students. Studies show that students from poorer backgrounds are detered bt the debt, though.

  5. The biggest problem I had in college was that I got into tons of debt BECAUSE I didn’t have any money. Then, when I finally had a job, I had credit cards, student loans and a tiny paycheck. If I’d known more about how to manage money BEFORE I arrived at the university, I probably would have said no to American Express.

    • @AverageJoe: Quite right! This seems to me to bea chicken and egg situation though: students don’t have money and they don’t know how to manage it. Where do we start? Probably much, much earlier that when they gat to university.

  6. I was not very financially savvy at University, but what I did know about the loans was how cheap a debt it is. My friends constantly talked about paying off their loan as soon as they were able, not realising that the debt gets wiped if it remains unpaid for several decades and if they never earn over the threshold income (about £15k)
    As for managing on a day to day basis, well 2003 – 2006 was the calm before the storm. My bank were practically throwing money at me in the form of an overdraft so I was able to stay afloat. I worked part time in the first year then packed it up to concentrate in Years 1 and 2.
    Most of us suckled on the financial teat of parents. For the current students this might not be an option given the hardships we all face.

    • @Darren: It is not very smart to not earn over £15K though. If I were there again, I would rather earn much more than that and pay my student loan than not. The rest of the points you make raise serious moral issues – particularly about things like giving back and ‘the ones who come after you’.

  7. £110 accommodation cost per week is mighty high,  I left Bolton university in 2003, back then student accommodation (halls of residence) was only £55 per week, I find it hard to believe that student accommodation in the current market has doubled. 
    I have read though recently property investors are cashing in on the student accommodation market in buying cheap and nasty properties and letting them out to students for above market prices,  yet another example of the younger generation being fleeced. But that`s only an opinion.

    • @Chris: Good thing I had a lecture with my undergrads today; I asked them (they are first year) and there was not even one who paid below £100 in Manchester for accomodation. Some of them lived at home and travelled.

  8. I agree with the tone of this article and it must be very difficult coming straight from school and being expectd to manage with these figures. However I agree with Chris – £110/week for accomodation in Manchester sounds very high. 5 years ago £550/month got me a decent 2 bed flat to myself in Withington/Didsbury area. Fallowfield was cheaper and nearer the university. I guess the students are being exploited and hopefully, as they become familiar with the area, their costs will drop.
    @MissThrifty. Students pay tax the same as everbody else. Generally they don’t earn enough to take them above the single person’s threshold.

  9. …………….. and of course the situation is completely different in Scotland.

    But I did my FE years in central London too – and NEVER had less than two jobs on the go. I even managed to wangle a live in job in a pub where I let the dray men in at 5am and did the kitchen prep before starting school at 8am, rehearsing all day, show in the evening then off to work a shift at a late night cabaret.

    To be honest – I don’t know when I slept – but I passed with honours and left in profit with no debt at all.

    My sons have savings accounts for Uni – but the eldest (13) is already preparing an online business that he hopes will fund his way too. My contribution will be instilling in them a work ethic and buying them a slow cooker so that they can eat LOL

    “If you can fry an egg, pull a pint and type a letter you will never be out of work” …….. and there were days I did all three.


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