Freshers’ weak on financial literacy as just under half of UK students feel confident managing their money

New research from Pay.UK, owner and operator of the Current Account Switch Service, reveals that many students lack the confidence needed to manage their finances effectively, while also having a lack of understanding of key products, including savings accounts.

• Just 45% feel confident managing their finances, and just over half (52%) consider themselves financially literate - the lowest percentage of all groups surveyed

• 44% of students are unable to cite the correct definition of a savings account

• The majority of students (51%) do not know how a savings account works

• However, the desire to learn is there, as 78% of students say personal finance education should be on the national curriculum

For students looking to better manage their finances, John Dentry, Product Owner of the Current Account Switch Service at Pay.UK, has provided the following tips and commentary:

• Calculating a weekly budget: A simple but important rule to follow when starting University is working out a weekly budget. With the food shop, among other things, now a student’s responsibility, it can be helpful for them to list what needs to be bought, and how much they can afford for each. To help make this task even easier some bank account providers offer a pot system, to separate money out for different uses.

• Understanding your overdraft: The initial pressures of student living can see some students dip into their overdraft. While this isn’t always an immediate cause for concern, it is vital that students understand the T&Cs of the overdraft their bank account might offer. Especially as a misunderstanding could lead to financial difficulty. For example, some banks and buildings societies offer a 0% overdraft, but others may charge interest, which can continue to increase at a fast rate.

• Utilising retailer discounts: One of the key perks enjoyed by students is the discounts offered to them by their favourite retailers and restaurants. These offers can be a big help when budgets are tight and student want to make small savings during their time at University. For those looking to adopt healthy savings habits, starting small and building up is a great way to start, as it’s not long before a few pennies or pounds, can form a little nest egg that can be used for a treat at the end of term or to pay for student essentials.

• Having the right bank account:  Some young people might still have the bank account their parents set up for them. It may be that it still works well for them and their financial goals but it’s important to consider looking for something new to align with their new adventure at University and make the most out of switching incentives offered by banks. For those who want an easy, free and guaranteed process, if they do decide to switch to a new bank account, they can use the Current Account Switch Service. The service supports switches to over 50 UK banks and building societies, of which, a large proportion offer accounts that are specifically for students.  

“Learning to manage money is a key life lesson for young people at university, which is why it is important, if they haven’t already, to build strong financial fundamentals. Not only can this reduce financial stress, but it can support successful long-term financial independence once their studies are complete.”

“We believe that having the right bank account is a key component of managing your finances. For example, some providers offer tools, trackers and savings pot settings to help with budgeting goals and keeping track of spending. As well as retailer discounts, some banks and building societies offer varying levels of cashback at chosen retailers, which can be helpful for keeping budgets on track and supporting savings goals.”

“When thinking about your bank account, it’s important for students to really consider what features and benefits are important for their individual financial needs and goals. This same thinking applies after university. Our financial needs and goals are always changing, whether that is moving to a new city for a graduate job, or even when buying their first home. If you feel you need something different from your current account, it pays to consider switching.”