Latest from YouBrand.net| Don’t let debt harm your health |
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Don’t let debt harm your health.
By Chris Tapp, Director of Credit Action
Being a student in the 21st century is, financially speaking, a world apart from the experience of students in previous generations. Whereas students previously left university with a pretty much clean money slate having enjoyed their grant; the students of today leave with an average projected debt of £14,161. It is easy to see how this could lead to some students, and certainly some parents, becoming rather stressed out by the prospect! Being a student needn’t translate into being bust though – a bit of simple thinking and good habits can ensure a great time at university is free of money stress.
Let’s start with the major issue, the student loan.
It is hugely important that people properly understand the student loans system - at Credit Action we produce a free ‘Student Moneymanual’ (www.creditaction.org.uk/student) to help people get their head around it – but the basic principle goes like this. You are given a loan (by the Student Loans Company) upfront to cover your student fees and living costs. This loan is charged at a rate of interest linked to the RPI measure of inflation and is paid off as you earn after graduating. The rate at which you pay it off is linked to your earnings so it should always be affordable, in effect acting more like an additional tax.
So whilst the amounts you have to borrow to go to university may seem frightening, the system is such that no-one should be put off going into higher education by the prospect of debt from the student loan. Potential problems can arise however if living on loans through university causes students to become comfortable with the borrower lifestyle. This brings us onto to the second big issue - credit.
It is very easy to be lulled into a false sense of security as a student with financial institutions seemingly bending over backwards to offer overdrafts, credit cards, store cards and loans. You don’t need a degree to get into substantial debt in this way! It is here, rather than with the student loan, that the debt rot sets in for students; and so it is here that students must ensure they are properly prepared and have a good understanding of different types of credit.
In general these types of product are best steered well clear of – using credit as a student can be a very slippery slope. However it is a good idea to take out some limited credit as a student so that you build up a positive credit rating. Your credit rating is what banks will use in the future to decide whether to lend to you, especially for big, expensive items like a mortgage. If you never have credit then you won’t have a credit history and, strange though it may seem, lenders will often be nervous about lending you money and sometimes – if you want to buy a house for example – then not being able to borrow money can be a hugely stressful experience. One good idea is to get a credit card with your student account, but only use it sparingly – for online purchases for example – and never, ever use it if you’re not sure you can clear the whole balance next month.
To help you stay in control when it comes to credit cards, store cards, or even your overdraft it can be a good idea to take practical steps to stop yourself spending when you don’t need to. With plastic in our wallets it’s all to easy to buy now, worry about it later. One good idea is to leave the cards at home so you can only spend the cash you have when you go out. You may see something you want to buy on your card but having to go home and get the card to make it happen gives you the chance to decide if it’s really a ‘need’ item you need or whether it’s just a ‘want’ which could end up costing in the long run.
Another vital consideration in staying financially healthy is keeping a budget. 80% of students don’t keep a track of their budgets and 1 in 5 doesn’t know to within the nearest £100 what their bank balance is. Making, and sticking to, a budget might not seem like a lot of fun but it can save a huge amount of hassle in the long run. The internet has made the process much easier with online banking giving us our financial information at the touch of a button and sites like www.moneybasics.co.uk giving online budgeting help – a budget need not involve a pad and paper at all! In fact you can even now budget on your mobile phone using the Moneybasics ‘Spendometer’ tool! This can be downloaded totally free from the Moneybasics site or from the app store if you have an iphone.
To see why all this matters, it is important to grasp the dangers of not managing money well. Debt is not just a financial problem. It’s very easy to think that debt is only a problem where someone simply can’t afford to pay off the money they owe but this goes some way short of really understanding the real depth of the issue. If you have rot in one wall in your house you need to get it sorted quickly before the rot spreads and the whole house falls down. Debt can be a lot like this. Whilst it starts out as a money issue, if not sorted quickly it becomes a problem which can spread throughout someone’s life.
According to a recent report by the Legal Services Research Centre (LSRC) 89% of debt clients interviewed reported worrying about their money problems ‘most’ or ‘all’ of the time. Perhaps as a consequence, the great majority of clients believed their health had been adversely affected by their debt problems. 48% of clients described the impact of problems on their health as ‘great’, and 43% felt that their health had suffered ‘to some extent’. Around three in five clients reported having received treatment, medication or counselling as a result. 45% of clients stated that debt problems had a negative effect on relationships with partners. According to the Samaritans money is the biggest single cause of stress in the UK with 51% of people reporting stress citing it as the reason. Debt is not just a financial problem, it is a wellbeing problem.
Finance is also something that we don’t really talk about much in the UK – most people would just as rather tell you about their sex life as they would about their bank balance! So it is important that if you do have questions about money or you find yourself in financial difficulty that you know where to go for help. Most universities will have a trained member of staff on their welfare team, they may even have someone linked to the FSA ‘Money Doctors’ scheme. Charities like Credit Action, the Citizens Advice Bureau and the Consumer Credit Counselling Service (CCCS) can also offer completely free, impartial information and help. Don’t go for help from a company or other organisation where the help you receive is not free and impartial – no-one struggling with money should be paying to receive assistance!
Being a student is a great experience – having money worries is an awful experience. That’s why it is important that students today take action now to ensure they don’t experience such difficulties.
5 keys to student money
(For free and independent debt advice visit www.cccs.co.uk or call 0800 138 1111) |
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