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;
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;
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)?