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Abu Dhabi, UAEFriday 21 September 2018

Students must master personal finance before flying off to university

Sending your offspring off to seek their fortune is no good if they do not understand the basics of managing their money

Illustration by Gary Clement
Illustration by Gary Clement

He looked overwhelmed by the process of finding a place to live during his first year at university.

It didn’t help that his mother was saying ‘good, he needs to study’, in response to the landlady stating it was a quiet neighbourhood and if it was nightlife he was after, there was none to be had where the house is.

A few weeks ago I was supporting a friend meeting potential tenants. She is now a first-time landlady – hers is a decision born of not wanting to lock in losses she would incur by selling the property at this point in the economic cycle, and renting out individual rooms instead. She is a former UAE expat and now lives back in her home country in the United Kingdom.

The priciest room went to a young lady who came across as extremely responsible and organised. She had worked out bus routes, knew more about the network than the landlady, and had arrived five minutes early. She said the rent was within her budget and left the viewing in search of a part-time or weekend job.

Wow, the impression I get is that money is talked about in her household, most specifically, what they can afford, and how important it is to save – not surprising as she is the daughter of immigrant parents on low pay. I’ll be getting updates and will be disappointed if this tenant has trouble paying rent.

Then there is the savvy couple. They knew they were on to a good thing when they bagged the rent stated for single occupancy in a big room – my friend has a way to go, and had not realised the need to add on a bit on for an extra person. There’s the additional wear and tear – as well as additional utilities being consumed.

They are also bringing their own furniture, so at least my friend will not be spending on that.

A daughter of a cleaning lady ended up in another one of the more expensive rooms because it was the only one then available.

I hope none of them end up like the university student I once commissioned to write a piece about her financial trials and tribulations. Away from her cocooned UAE lifestyle for the first time, she shared that she lived like a princess for the first half of each month – no expense, or want, spared, and the second half a pauper, having run out of cash.

Luckily, her parents could afford what it took to get her through her studies and lifestyle. Unlike her, the students and their families I met during the viewings are taking on loans, or at best, living within very tight budgets for this phase of life.

According to the UK’s Institute of Fiscal Studies in 2017, the average student in England will graduate with debts of over £50,000 (Dh237,361) – those from poorer backgrounds will incur more, with more loans available to them.

In the US, $1.5 trillion (Dh5.5tn) is the collective student loan debt – meaning the average student in the class of 2016 owes $37,172, according to the Federal Reserve.

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The effects of this can last a lifetime. According to a study out this summer, large student loan debts leads to lower job satisfaction, harms people’s physical and mental health and affects their lifelong finances. Experts from the Centre for Global Higher Education, based at the UCL Institute of Education and the University of Michigan, came to this conclusion having reviewed existing research on the subject mostly from the US but also from England over the past 20 years.

When I met the bewildered student I started with, it was obvious he had checked out mentally. He was not really at the viewing – he was in shock. I’m sure he, and not the savvy ones, represents the majority of tertiary students starting off on their own paths - with little, if any, financial know-how. They are expected to launch themselves from being dependents one week, to adults responsible for credit scores and managing money – the effect of which will impact their future plans in ways that are more significant than their grades or chosen careers.

Sending young people off to seek their fortune is no good if they don’t have their financial fundamentals in check.

I say it needs to include how to cook a minimum of five decent meals. (yes, beans on toast is one) – and how to shop at a supermarket. In an attempt to reduce hassle and risk, my friend the landlady decided on rent that is inclusive of utility and broadband use. This means that her tenants only deal with one monthly payment, that’s it. She’s removing the burden of figuring out spend, collective paying of bills, and potential fallout. Her tenants (and her) will have enough to deal with without this.

This is why my gift to my niece - who is starting her university phase - is a food-box – full of yummy, easy to prepare meals – and the odd treat. She’ll have enough on her plate without needing to think about food too.

Nima Abu Wardeh is a broadcast journalist, columnist and blogger. Share her journey on finding-nima.com

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