Student Finance Guide: How to Manage Money
Posted September 7th, 2009 and last modified November 22nd, 2011
Being a student is not just about earning a degree and hitting the books. Let university life serve as the beginning of handling your finances responsibly.
The Tricks To Balancing Your Student Finances
Australian University students can expect that dealing with the student finance of their education almost as difficult as juggling all their assignments. This is a fact of student life but one that needs to be embraced so that there are no nasty surprises down the track. What also makes this a difficult task is that most new students have not had to deal with living independently before entering university.
Right from the outset there are expenses that go into the thousands of dollars as course fees such as the following annual fees that have to be met through student finance somehow: business, maths and science students can look at paying $7000, law, medicine and vet students $8200 and arts students $4900 (these are round figures only).
The Australian Government does have a HECS-HELP (higher education contribution) scheme and loan program which most Australian students can access and if they pay at least $500 of the initial cost of each course, they will receive a 20% discount on the total debt. It is not difficult to see how so many graduates leave university with a large debt to their name before joining the workforce.
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Living Expenses
When it comes to every day expenses, accommodation tops the list. Even in a share-rent situation accommodation is still expensive. It would be rare to get something that costs less than $100 a week and could be substantially more in Sydney and Melbourne. If you live away from home you will find that any Government funding you receive does not cover your total living expenses.
Centrelink does pay rent assistance in certain circumstances (up to $111.20 a fortnight if rent is more than $247.07 for people who are single with no dependent children) but the reality is, that does not cover accommodation costs and there is still a large shortfall.
Most students find that rent and food use up any Government payment and so they have to work to find money for other expenses.
This makes living at home a much for sensible financial option for most students. Most students whose family live within range of the university prefer to live at home to reduce the financial stress of living away from home.
Government Payments
The Government benefits that students may be eligible to receive fall into two categories: Youth Allowance (age 16 to 24) or Austudy (25 and over). Both pay up to $371.40 a fortnight if the person receiving the payment is single and has no children.
If you apply for Youth Allowance, you will be assessed as either dependent or independent. Income and assets tests will be used to work out how much you can get. If you are not independent, the parental means test will also usually apply. There is no independence test for Austudy. A student can earn up to $236 a fortnight before their payments are affected. A student who earns between $236 and $316 a fortnight will find that their Centrelink payment is reduced by 50 cents in the dollar, rising to 60 cents in the dollar when they earn over $316 a fortnight.
The real problem with student finance
Although the above figures may make you wonder at student finance, the real problem lies in the management of their funds.
Three other spending patterns cause much larger problems:
- Mobile phone bills
- Internet bills
- Credit card bills
Reports coming from Monash University say how students are quite naive when it comes to their finances, especially in relation to credit cards. Using a prepaid phone card could save those horrendous mobile phone bills that can easily run into the hundreds of dollars.
Student loans can be set up through universities and it would pay a student who gets into financial difficulty to approach the right sources within the university and see if they can be helped there rather than run up a credit card balance. There can be conditions with these loans so it is important that a student understands the full implication of them. There could also be the possibility of getting a means-tested university scholarship.
Quite concerning is the number of students that drop out of university because of being unable to come to terms with managing their student finances.
Learning the importance of a student budget
The unfortunate part is that most students are inexperienced at budgeting, but having a sensible budget and being able to stick to it is one of the practices that will help in managing student finance. Most students have not had to plan ahead with their finances before and find this a difficult task. It is such a change from living for the moment and living at home.
The time to make your budget is before going on campus. You will always, throughout your whole life be mixing with people who have more money than you, with less money than you but spend recklessly and so it is a good idea to weigh up your own expenses before being influenced by other people.
When doing a budget, the basic weekly costs could look something like this: food $50, petrol $20, travel pass $30, mobile phone $12, accommodation $120, credit card payments, then there will be the one-off expenses like car registration, insurance and text books. Each student will have different expenses to manage. Many universities offer a blank budgeting planner link in their website or in hard copy so access one of these and use it to guide you through making your own personal budget.
One important point to remember when setting up a budget is to ‘allow’ yourself some spending money. It does not have to be a lot, but enough to ‘treat’ yourself to something that you really like. If you can do this every now and then you have a much greater chance of not blowing the budget because you will know that every two months or so you can buy a new top or spend a day at the race track, whatever!
If you want a real eye-opener, quickly at the end of each day write down what you have spent. It is so easy to forget $3 here and $2 there, but at the end of the day it can add up to quite a bit, especially if you have decided to have a day away from the books.
There is no doubt that cars are great to have but the reality is that it will probably cost you in excess of $50 a week taking in registration, petrol, insurance and the odd repair. Can this be afforded? That is a question only you can answer.
Who said ‘temptation is the root of all evil’? Well it certainly can be the root of an overused credit card!
When you are given your text book list, see if you can buy them second-hand. If you can, try to purchase them much cheaper online. Occasionally you may have to purchase a new edition but that won’t be the case most of the time.
Get used to taking meals with you. One valuable tip for taking your own food is to only buy on special and only buy in season! This will help keep food expenses down. Rice and pastas make fantastic cold lunches and can be so cheap.
No fee bank accounts
Check around at the banks and find out where you can get a no-fee bank account. The next thing you need to watch for are ATM expenses, free transactions etc. If there are ATM fees, by learning to get cash when you purchase items like food or petrol you will avoid ATM fees. Most banks seem to have student offers so see which one will work best for you.
Meeting expenses
There is no doubt that if a student has the financial back up of their parents life can be so much easier financially, not easy, just easier! Most students who do not have the family helping out occasionally financially have to work as much as 30 hours a week in order to keep in control of their student finances. This adds huge pressure on a university student.
By budgeting you will enjoy a more active and financially stress free lifestyle. There may be the odd time when you feel you are missing out, but with budgeting you will find that you can do most things you really want to do and not feel guilty.
Understand what concessions you are eligible for under your Centrelink payments and take full advantage of them. It could be cheaper car registration, discounted travel, cheap medicines, power bills and phone bills.
Take some time out every now and then and review your spending. You will probably find that there are some expenses you can cut without feeling disadvantaged. Keep your receipts and then each uni break, spend half a day and review your budget. It really will make life at university more enjoyable.
See our Student Credit Cards guide which also includes a comparison of student finance products.
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