How to budget better: graduation and beyond

In this episode we’re joined by Tom from Save the Student, who offers some helpful tips and tricks on how to look after your money whether you're a student or graduate

Participants

In order of first appearance:

• Emily Slade - podcast producer and host, Ä¢¹½ÊÓƵ»ÆƬ
• Tom Allingham - communications director, Save the Student

Transcript

Emily Slade: Hello and welcome to Future You, the podcast brought to you by graduate careers experts Ä¢¹½ÊÓƵ»ÆƬ. I'm your host, Emily Slade and in this episode we're joined by Save the Student who offer some helpful tips and tricks on how to look after your money - whether you're still a student or just about to graduate , this episode has something for everyone focusing on your financial future you.

Tom Allingham: I'm Tom Allingham, and I'm from the student money website, Save the Student.org. We are a student money advice website. So we help students learn how to manage their money, how to make their money go further, how to figure out things with student finance, and all that kind of stuff. But also lots of general student advice as well and advice on kind of getting through university and then approaching graduate life as well. And I think that's really what I'm here to talk about today. Is that kind of time into coming towards the end of university and looking into life as a graduate.

Emily Slade: Perfect. Do you have some top tips when it comes to budgeting?

Tom Allingham: Yeah, absolutely. So I think the important thing about a lot of the information on my website, actually is that, yes, this information is really, really useful for students. But a lot of it really is actually great advice for life. You know, there's a lot of the advice on the website of stuff that I do in my kind of day to day life to try and save money. So I think one of the big things, for instance, is with your bills, or your bank accounts, always compare and always switch providers if you think you can get a better deal elsewhere. So things like like I say, energy bills, maybe not so much at the moment, but in kind of quote unquote normal times, mobile phone bills and bank accounts, it's very, very rare that being loyal to one company, or one provider will actually be beneficial to you, it's usually much much better to switch to a different provider, because new customers get the better deals you might get, you know, a certain kind of freebie by signing up to a different company. But as I say, it's very rare that sticking with one company, you know, for longer than a couple of years is going to pay off. So always look to be kind of comparing and switching providers. Where possible as that's something you can do at any moment, any time just have a quick Google as to what's out there and just sort of do it one weekend. There will obviously be some limitations to it. So I would say for instance, with, say mobile phone contracts, if you're on, let's say, a 12 month, or more likely a 24 month contract, you will probably have to see out the term of that contract. But if you are approaching the end of it, or if you are out of contract, that's the time to be looking to compare and switch. And with regards to energy bills, so they say we're just kind of coming out of the energy crisis now. So we're starting to see more providers offering different rates. With that kind of thing, you might find that you're with a provider who doesn't have any charge at exit fee whatsoever. So there'll be no fixed contracts that you can basically look to switch at whatever time so in theory, you could switch you know, every single month to a different energy provider, if you were able to find a different better deal every single month. Obviously, the practicalities of that are a bit you know, might not always be possible. But in theory, yes, it is something you could do any anytime. One thing we always like to encourage people to do is try to have at least one no spend day each week, which means that you have a day in the week where you just spend no money whatsoever, which might need some forward planning. So it might mean that you need to do a weekly shop or something, you know, just to make sure you have food and on the day, obviously, if you're commuting to work or to university or whatever, probably won't be one of those days because you might have to pay for the bus or train. By doing this, you're kind of reversing that that habit that you might get into nowadays with mobile phones with contactless all these kinds of things where it's very, very easy to get into the habit of spending money almost as a habit by having a no spend day at least once a week, you're kind of reversing that and getting into the mindset of actually, you know, I don't need to spend money all the time.

Emily Slade: I imagine there's lots of information on your website for students, undergraduates, that sort of thing. But what we'd really like to focus on today is that transition from undergraduate to postgraduate. So can you tell us a bit about tips and tricks in that stage of your life?

Tom Allingham: Yeah, absolutely. So the big thing is that obviously when you're a student, chances are you will have a student bank accounts. That's a special bank account that the bank has given you with certain conditions and certain terms that are only available to you because you are a student. And the big thing is that you have that not percent overdraft of a few £1,000 that lasts for the duration of your time at university. Now, when you get to the point of graduation, the chances are you will probably be in that overdraft to at least some extent, you know might be a couple of £100, it might be a few £1,000. And you might be concerned about what's going to happen with that debt when you graduate. The good news is that all student bank accounts become graduate bank accounts when you leave university, so you'll get to keep your net present overdraft for at least another year. It is worth noting though, that while you're a student, the allowance of your not present overdraft usually would increase each year. So you might get a maximum amount of £1,000 in your first year £2,000, your second year £3,000. In the third year, when you graduate, the opposite happens. So you go from whatever the maximum you're on now, and it will slightly decrease year on year. In some cases as well, you might only get a graduate bank account for one year. So as I say, it's worth noting that not all graduate bank accounts as with student bank accounts, they're not all the same, each bank will have its own different terms and conditions. And it's also worth noting that not all graduate bank accounts allow you to switch to them after you've left university. So with that in mind, I would say that if you are approaching the end of your time at uni, check in advance, see what the graduate bank account terms are with your bank. See, if the not percent overdraft allowance that they're going to give you is enough, is it going to last for long enough for you to kind of get out of that overdraft, there's no guarantee that you'll get a job straight away when you leave university. So bear that in mind. And also, as I say, check to see if there are other better graduate bank accounts out there. And if they'll let you switch to them after you've left university. And if they don't, if they only let you join them as a student. So IE before you've graduated, make sure you do that in the next couple of months. And don't leave it too late. Because it might be them that you're not able to switch to that bank account.

Emily Slade: Amazing. Thank you. One of the first costs I think the students who are going to be hit with when they get to the end of their studies is graduation. Would you like to talk a bit about that?

Tom Allingham: So you might think, you know, having attended university for three plus years and spent over £9000 a year in fees, that you kind of get to go to graduation, and it would be free. That's not always the case, unfortunately. So some universities do give you free tickets to your own graduation. So it's worth noting that as a student, you will get to go for free. But if you want to have guests attending your graduation, so you might want to have your parents there, or your partner or your friends or whatever, you can sometimes get free tickets depending on the university, but it will usually be a maximum of two per student. But also, not all universities do give out free tickets to graduation. And when they're not free, they can also cost as much as £20, or £25. So if you want to bring two guests, you could be looking straight away a £50 cost. On top of that, though, robes. So we're talking about the the gown that you wear over your clothes and the hat as well. These are almost always mandatory for you to wear as part of the ceremony. So you will have to rent those. And quite often universities will say that you have to get them from a certain provider, which means that you won't be able to then get it from a kind of cheaper, you know, for want of a better term like knockoff provider, if you're able to find them cheaper elsewhere. Unfortunately, lots of universities say that you have to get them from whatever provider they've got an agreement with. And in these cases, it will cost you £40 to £50 for rentals. So if you're looking at the cost of tickets together with the cost of robes, then you took into the thick end of 100 quid here, just to go to your own graduation. And that's not even including the cost of professional photographs, which these aren't mandatory, you can choose not to have them and just take your own photographs. But then you'll be looking at another I would say minimum £20. So it is worth noting that these are the costs associated with going to get your graduation, you don't have to go to graduation. But I say that you've gone to university for three years, it's a nice thing to be able to do. So again, think about in advance if you want to be covering these costs, or if you want to be paying for extra guest tickets to your graduation, have these discussions with whoever you want to come to your ceremony. And think about how you might be able to cover those costs in advance.

Emily Slade: Most people when they attend university will have gotten some sort of loan to try and cover the costs. And then they will obviously have to start repaying that. Can you tell us a bit about that?

Tom Allingham: So the way that you repay your student loan does vary depending on which part of the UK you're from, which then determines what type of repayment plan you're on. But the general rules across each repayment plan are basically the same. So there's a threshold at which you start repaying your loan. And that, as I say, that varies across the UK. So it could go from as low as at this point anyway, as low as about £22,000 a year to as high as about £27,500. Once you do start earning over that threshold, you pay 9% of whatever you earn above it. If you start adding below that threshold, then your student loan repayments stop completely until you start earning above it again. It's also worth noting that you don't start repaying your student loan immediately after graduation. You start repaying it in the April after you graduate. So let's say you graduate in July 2024, you won't start being eligible to start repaying no matter how much you earn, you won't start being eligible to start repaying your loan until April 2025. So that's another thing to consider as well. There's also the element of cancellation of the debt. So again, this varies depending on what your student loan plan is, it could be up to 40 years, but that's only on the new plan in England for students who started in September 2023 or later. For everyone else, it will be 30 years or less. And basically what that means is if there's any outstanding balance on your student loan, after that period, the government will cancel it. So you don't need to be paid, and an important consideration to make with all of the student loan plans. is that, as I say, it's only a percentage of your income over a certain amount. So with that in mind, it is kind of like a tax. And it is, broadly speaking, quite manageable. But also, it doesn't affect your credit score. And you won't have for example, Bayless coming off to you, if you're not paying it, it operates in a very different way to traditional debt. And as I say, because you're not repaying until you're on over a certain threshold, it comes out in salary automatically is not something that you need to worry about too much.

Emily Slade: Once you graduate and start working, I was gonna say you've already answered, it's not really anything to be sort of worried about or scared about, or really sort of stay on top of in the way that you would a normal loan that you've taken out? Would you advise anyone thinking about actively trying to pay off their loan is it almost better to not invest in that, because of the the amount that's going to build upon it over the years?

Tom Allingham: Yeah, it's, it's a tricky one to give an absolutely definitive answer to, because it will vary based on circumstance. So if you either graduate into a job with a very high salary, or expect to be earning a very high salary quite soon, then there might be reason to pay off your loan early. Because, essentially, because there's a good chance you repay in full at some point, for most people. And again, it does vary depending on plan. For most people, you probably won't end up repaying your loan in full. And as such, there's not really any reason to make voluntary repayments on it, because as I say, after that period of time, the government will cancel the remaining debt anyway. So if you have a certain amount of money that you're able, and you're thinking, Oh, I have this spare cash, I could put it into repaying my student loan, our advice would very strongly be put that somewhere else, you know, be put that towards, for instance, if you've accumulated any private debt, or credit card debt, pay off that. Or if you're looking to buy a house at some point, you know, put it into your savings, put it into, you know, towards a deposit, that's a much better use of that cash.

Emily Slade: Would a recent graduate need to be considering anything like an emergency fund, if they were to find themselves kicked out of their accommodation? Or made redundant from a recent job? Is that something that they need to keep in the back of their head in terms of their finances?

Tom Allingham: I think again, it's one of those ones where it's difficult to give a definitive answer for everyone, what I can say is that, if you do find yourself in a situation where you do have some expendable income, so you're not having to spend all of your income on your kind of basic living costs, like rent and food and travel, if you do find you're able to put some money into savings, then absolutely having an emergency fund is a great idea. Because you know, you never know what's going to happen, it could be that your car breaks down and you need to, you know, have substantial repairs on it, it could be as he say, being kicked out of your accommodation, all of these things are something that you often can't see coming. And we'll want that emergency cash flow. But it is also worth bearing in mind that lots of graduates will not be starting on huge salaries, and might not necessarily be able to put much if any cash into an emergency savings pot. So with that in mind, I would say put money away if you can. But, you know, be aware that it's not possible for everyone and don't feel like you're kind of failing or whatever, if you're not able to do that.

Emily Slade: Perfect. Thank you. So that's sort of around looking towards the future. How sort of soon as a graduate, should you be worrying about saving for a house? Is there a way that tips and tricks that you can sort of get on the property ladder as you're coming out of your graduation?

Tom Allingham: Yes, so again, you know, buying a house is something that will vary so drastically from person to person, I think the average age at which person, a person buys a house in the UK, I think it's currently about 33, 34, 35, which is kind of depressingly old. And you know, might seem quite a way off for a new graduate, you know, we're talking best part of 15 years away. But you can make that happen sooner, by taking a few steps, I think the single biggest thing that anyone can do, you know, which is very, very easy as well is to open a Lifetime ISA (individual savings account) which is a kind of government backed savings account, where each year you can put in up to £4000. And the government, you know, depending on how much you put in the government will pay a 25% bonus into your account on up to £4000. So let's say you put in the maximum of £4000, you get 25% of that as a bonus from the government £1000 starts, then your total savings for that year goes to £5000 and you can put in, you can do it every single year and get that £1000 bonus or up to £1000 bonus every single year. And I think it goes for about 30 ish years. So in theory, you could earn up to £30,000 of bonus money from the government and that's not even including the interest that you can earn on that account as well. There are some stipulations with the account though so the money in it can only be used to buy a house or for your retirement. As well actually, I think if you have been given less than 12 months to live, I think you can take the money out. If you take the money out for any other reason, you'll be charged a penalty, which currently means you'd lose your entire government bonus plus a percentage on top. Now, there is talk that this might change at some point soon, at which point, in theory, it would change so that you'd only lose the government bonus. So you wouldn't actually be any worse off than the money you put in in the first place, if you took the money out for any other reason. And another thing to consider is that there is a cap on the maximum value of the property that you can use the Lifetime ISA for. Now, again, that is taught that this, this capital might increase very soon, because it hasn't increased for a long time. So I think it's £450,000 at the moment is the maximum value of a property you can use it on. Since the Lifetime ISA was introduced, obviously, house prices have increased, so £450,000 gets you less than it used to. So as I say that that limit might increase at some point very, very soon. But it is worth noting in case you live in an area where you don't think that the maximum amount that I like to allow you to buy will actually be enough to get you anywhere where you want to live.

Emily Slade: Let's say you want to continue your studies heading into a postgraduate degree, for example, what options do people have that?

Tom Allingham: So yeah, with postgraduate degree funding, in principle is quite similar to undergraduate degrees and that you can get funding from the government. But it does vary across the different parts of the UK. So in England, Scotland and Wales, you can get a loan from the government to pay for your tuition fees, annual living costs, but in Northern Ireland, the money that they give you is only for tuition fees. But even in England, Scotland and Wales where that money is designed to go towards tuition, fees and living costs, I would say in the majority of cases, the amount of money that they give you, particularly in England and Scotland, will not be enough to cover both your tuition fees and your living costs. So unlike our undergraduate level, where they give you a separate Tuition Fee Loan and a separate Maintenance Loan, so the Tuition Fee Loan goes straight to university. at postgraduate level, they do just give you a lump sum of money. And it's up to you to divide that between tuition fees and living costs. And as I say, in the majority of cases, you might have enough to cover your tuition fees. But unfortunately, a lot of cases won't be enough to then also cover your living costs as well. So that's when you're going to be looking to alternative sources of funding. So you might be looking at research grants from your university sponsorship from your employer, sponsorship for maybe a charitable foundation or a trust or potentially as well, you know, getting a part time job to see you through that time at university. But as I say, unfortunately, the Postgraduate Loan probably won't be enough to cover your tuition fees and living costs info.

Emily Slade: Excellent. Well, thank you so much for joining me today.

Tom Allingham: Thank you, Emily. It's been an absolute pleasure.

Emily Slade: Thanks again to Tom for their time. If you want to find out more about Save the Student, you can click the links in the description below. Make sure you give us a follow wherever you get your podcasts. If you want to get in touch you can email at podcast@prospects.ac.uk or find us on Instagram and TikTok, all the links are in the description. Thanks very much for listening and we’ll see you next time!

Notes on transcript

This transcript was produced using a combination of automated software and human transcribers and may contain errors. The audio version is definitive and should be checked before quoting.

Find out more

• Discover more from Save the Student.
• Take a look at tips on saving money as a student.