Top Money Tips for New Graduates
There’s no user manual to life after uni – but these insider tips are the next best thing. Here’s what graduates need to know about money.
1. Lock-in the best offers
Once student discounts end, everything from rent to bus fares costs more (whether you’re earning or not).
Paying full price can be a shock to the budget, but there are ways to lock-in time-limited offers: get a 3-year 16-25 Railcard the day before you turn 24, for instance, or grab a 3-year Totum card just before you graduate.
Now is also the time review subscriptions before the price jumps up. For starters, Amazon Prime membership costs twice as much after you graduate. Run the costs through your budget, and cancel any you can’t keep up with.
2. Budget with take-home pay
Whether you work full-time, part-time or freelance, a slice of your earnings goes to the government’s pockets. For most employees, Income Tax and National Insurance is automatically deducted before you’re paid, meaning you take home less than you earn.
For example, a yearly salary of £22,000 is actually £18,500* after taxes – that could be as much as £300/month less than you’re expecting. Your wages may drop a bit more when you contribute to a workplace pension or start to make Student Loan repayments.
When budgeting – especially for rent – use take-home pay, not full salary, or you could run short later on. This calculator can work it out for you.
*In the 2019/20 tax year.
3. Deal with your overdraft ASAP
While student bank accounts let you borrow money for free (i.e., 0% overdraft), the deal becomes a pumpkin after graduation. Anything you owe, or continue to borrow on your overdraft, will start earning interest – so your debt keeps growing.
Transfer to a graduate account with a 0% overdraft if you haven’t already. Next, work out how much to repay each month to clear your debt before the deal ends. You’ll need to budget to make this work, so get on the case! The sooner you clear the balance, the less it’ll cost you.
4. Don’t rush to repay Student Loan
Don’t confuse Student Loan debt with bank debt like overdrafts and credit cards. Student Loan repayments are flexible: if you don’t earn enough, you simply won’t make loan repayments.
If you do earn enough, however, you can choose to make extra, optional repayments. This can be tempting if you want to get rid of your student debt asap – but don’t rush into it!
Most grads won’t pay back the full loan before it gets cancelled (after around 30 years), so extra contributions may mean repaying more than necessary. Plus, once you hand the money over, you can’t get it back – for instance if you’re skint later on, or need cash for something else.
5. Got income? Start saving
Whether you hate your job, love travelling, worry about unemployment or want to be fabulously wealthy, savings are the key. Putting cash away gives you more financial freedom and more choice.
Despite the benefits, more than half of 20-somethings have NO savings, leaving them doubly disadvantaged by high living costs and the challenges of finding well-paid work.
The golden rule is: if you’re earning, put a portion of take-home pay straight into a savings account as soon as you get it. Alternatively, if you do your banking by app, use the round-up or auto-investing feature. You won’t save as much, but it makes light work of putting money aside.
Whether you save, spend or go absolutely wild is your choice; just make sure you’re following your own dreams and not someone else’s! Think what you want from your cash now and in 5 years’ time, then get real about whether your everyday actions help or hinder your choices.
Guest blog by Ruth Bushi, an editor at Save the Student
– the UK’s largest student money advice site.