It’s that time of year again – the air is turning crisp and pencils are being sharpened. Back to school. Many will be starting off a new chapter at university. While juggling the demands of course work and lectures with parties, Fortnite, and beer, who has time to think about finances?
But if there is something worse than getting your card declined at the late night take-away, it’s having to ring up mum or dad asking for a loan. So here are some ways to approach the new academic year to set yourself up for a semester of financial wellbeing.
- Don’t be an ostrich. It can be tempting to live in ignorant bliss when the alternative is to face up to grim news of a bank balance approaching zero. So tempting that it even has a name in behavioural science: the ostrich effect. But a few moments of blissful ignorance is likely not worth the eventual pain of having your card declined, overdraft fees, or penalties for bounced payments. It is important to pay attention to your money so that you can make ends meet day to day, have something set aside for an emergency, and even begin to plant the financial seeds for a longer-term goal.
- Agree terms. Living with flatmates? This might be the first time you will have to manage money for yourself, let alone for a shared household. Ensure you set up the terms of the household budget together and agree them. Under whose name will the bills be? Will you split each bill? Which accounts will be shared and which will be personal? Setting the rules of engagement together upfront can help prevent mis-matched expectations or differences in opinion at an inopportune time down the line, say when everyone is skint and there’s no loo roll left.
- Plan for a slip-up. Because slip-ups will happen. Although we may appreciate that bad things happen, we tend to optimistically believe that they won’t happen to us. If you can afford it, put a chunk of money aside right from the start as insurance. If you can’t afford to put a big chunk away now, build up an emergency fund bit by bit over time by allocating a part of each paycheque to the cause.
- Set up systems now to help you in the future. Setting up automatic transfers can help take the sting out of recurring payments, such as for bills or to an emergency fund. Making the decision and taking action to set the transfer up is a one-time effort. After that, you won’t have to rely on memory and good intentions to ensure that the people or companies that you have committed to paying receive their funds. No more late fees or accumulated interest. Similarly, help yourself from falling short when there are peaks in expenses by automating transfers to a separate, non-everyday, account. This may help to build up for lumpy expenses, such as textbooks at the beginning of each term.
- Ask for help and share what works. Have you checked whether you are eligible for a scholarship or other financial assistance? Find out what support your uni offers – some offer drop in sessions for money management questions. You’ll be meeting people from different backgrounds with different circumstances. Money often still feels taboo, but sharing your experience might just help someone else who may be feeling financially stressed.
Good luck, and keep mum and dad on speed dial. You can skip the ask for cash and get straight into the conversation about how proud they are of you.
Nathalie Spencer is a financial behaviourist and the author of ‘Good Money’, which will be published on 11 October.