5 top financial tips every young person should know before they start university

With September and the new academic year right around the corner, you might have children or grandchildren preparing to head to university, begin an apprenticeship, or embark on a new career.

Flying the nest and getting to grips with “adulting” can be challenging. And, for some young people, it may involve managing their finances alone for the first time.

From student loans to top financial tips, keep reading or share the link with the young people in your life.

1. Get to grips with how student loans work

According to House of Commons Library figures, around £21 billion is loaned to roughly 1.5 million higher-ed students each year. If your child or grandchild is one of them, it’s worth understanding how student loans work.

Student finance in England is usually made up of two parts:

• Tuition fee loan, paid directly to the institution
• Maintenance loans, paid to your child. The amount they’re entitled to usually depends on where they’re living. Depending on circumstances, they may be eligible to apply for.

While students will need to repay the entire amount they borrow, repayments won’t start until the April after they leave university. And repayments only become due once their income exceeds a certain threshold.

For Plan 5 loans (or those starting from September 2023), the threshold is £25,000, set to increase in line with inflation from 2027.

Other aspects of student loans it’s useful to understand:

• The term of the loan – Plan 5 loans are automatically written off after 40 years, or if the borrower passes away.
• Student loans do not affect your credit score – While student loans may be factored in when calculating affordability, having outstanding student loan debt won’t affect your credit rating.
• The way interest works – Interest starts rolling up from day one at university, so the amount they owe will increase from the very first day of their course. Knowing this key fact could help to avoid an unsettling surprise when reviewing the first loan statement.

With the basics of how student loans work nailed, the following financial tips may also help you make the most of your money.

2. Boss your budget

Knowing how to balance your budget is essential.

Adopting good habits early will help you to keep track of your income and outgoings, and prevent you from overspending.

• Add up your income – your student loan, money from your parents, or income from a job.
• Subtract your essential outgoings – tuition fees, rent, food, household bills, phone bill.
• Calculate any disposable income, available to spend on books or equipment for your course, music, social activities, or clothes.

Understanding the difference between essential payments and disposable cash is key. It’s also really useful to be able to identify and separate what you “want” from essentials you “need”.

Read more: Your guide to budgeting basics

3. Keep an emergency fund on hand

Unexpected events can happen at any time, so having a pool of cash that you can call on in a crisis is a crucial part of any financial plan.

Ideally, this “rainy day” fund should typically have enough to cover around three months’ worth of everyday expenditure.

Designed to help cover an unexpected expense, it’s best to keep your emergency fund in an easy access account, so it’s quick and easy to get the money when you need it.

Read more: The importance of an emergency fund – What is one and why do you need it?

If you don’t have an emergency fund right now, don’t panic. Instead, start thinking about how you can save a little money each month – you’ll be surprised how quickly even the smallest sums add up over time.

4. Handle your credit card with care

Many student bank accounts come with a credit card.

If you get one, think carefully about how you can best use it and make sure you understand how to approach spending on your credit card.

While having a credit card in your wallet can be helpful, it’s far from “free money”. So, resist the temptation to splurge and splash the cash.

Rather than going on a big spending spree, use your credit card for small purchases, and pay off the balance every month.

This approach will not only help you to keep a handle on your spending, but it will also help to build your credit score – which could stand you in good stead when you apply for your first mortgage.

5. Make the most of student offers and discounts

Student discounts can help you make substantial savings. From clothes and music subscriptions to meals out and car insurance, there are loads of companies offering money off.

Previously the NUS card, TOTUM membership grants you access to some amazing discounts and savings that could help to bolster your student budget, including:

• Travel – coach and rail discounts, as well as hotel rooms, flights, and holidays
• Food and drink – plus Deliveroo and Just Eat for when the cupboards are bare
• Tech and mobile phones – no excuses not to call home once in a while
• Entertainment – discounted cinema and theatre tickets, and days out
• Fashion, beauty, and grooming – to keep you looking sharp.

While you can have a TOTUM card if you’re an eligible students, a recent graduate, or an apprentice, you can also have one if you’re:

• A member of a Chartered institute, professional body, royal society, trade union, or similar membership organisation
• Academic or support staff at a training provider or professional institute
• An employee with a gov.uk email address.

With TOTUM membership, you should find you’re able to stretch your student budget further.

Get in touch

If you know a young person who’s headed to university or about to start full-time work, sitting down for a chat with a financial planner could stand be time well spent.

Please email us at info@logicfinancialservices.co.uk, call 01491 612 754, or drop into the office.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.