The dire state of student finances come the new academic year has been highlighted in new research which has shown one in ten students will blow just over £2,700 of their loan in the first fortnight.
The new research has come from the Institute of Inertia - a partnership between the University of Sheffield and comparethemarket.com - which also found just over half will spend their entire loan before the end of term, while just over a quarter will see themselves fall into their overdraft.
Despite the appearance of their bank balance by the end of the term, students are surprisingly self-assured when it comes to their financial management skills, so much so that 89 per cent said they feel confident when it comes to managing their loan which they receive three times a year - or once a term - to cover their living costs.
However, a large majority of students said the lump sum loan deposit wasn’t the ideal format, with four in five saying they would rather receive this payment in smaller instalments throughout the term.
To counter any lack of financial management, the same poll revealed students are relying on family ties to help get them through tight times during the term, with two-thirds turning to the ‘Bank of Mum and Dad’ for monetary support.
But while parental financial support might provide temporary relief to stretched students, the difficulty many are having with managing their finances - resulting in a range of subsequent financial issues - could stem from a lack of basic money skills; while a quarter of parents admitted to never having spoken to their children about managing their finances before going off to university, just over half said their children would benefit from expert financial guidance before going to university.
The lack of teaching around financial education for young people was recently highlighted by an online credit score provider which found an entire generation of young people are ruining their credit ratings without even realising.
A leading financial education charity also warned, last month, how the ever-changing student finance system in England is causing confusion among young people, undoing current education efforts, and possibly putting them off applying for university.
Dr Thomas Webb, a social psychologist at the University of Sheffield and chair of the Institute of Inertia, described how the new research clearly points to the challenges that students encounter when managing their finances whilst at university, particularly with the revelation that more than half will spend their loan before the end of term. He said: “This finding likely attests to the often-cited ‘gap’ between people’s good intentions - in this instance, to make their money last - and action.
“However, the survey also points to the need for strategies to support students, with university often the first time they gain financial independence. The Student Loans Company’s policy of providing the loan to students for the first term in one lump sum - rather than in instalments which four-fifths of students said they would prefer - no doubt contributes to the difficulties students face in making their money last.”
The survey has come after another similar one from HSBC last week revealed how freshers are set to spend an eye-watering £3,300 each, only this one found the staggering amount will be spent in the first 100 days of university.
Head of money at comparethemarket.com, Jody Baker, echoed Dr Webb’s comments and provided a solution for effective money management. She said: “For many new students, their first student loan deposit is likely to be the most money they have received at one time and, while a majority say they feel confident managing their finances, their bank balances at the end of the term or the need to rely on the ‘Bank of Mum and Dad’ state otherwise.
“What’s more worrying is that parents think that their children would benefit from financial advice, yet many aren’t leading conversations in this area - a small move that could make a big difference to how money is managed during term time.”
£2,700 figure is based on a maintenance loan of £2,714 provided by the Government per term for a student in full-time higher education, living away from home, with an average household income of £27,500 - stated by the ONS here as the average household disposable income in the financial year of 2015
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