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To close off our series on financial literacy, we thought it would be important to discuss the misconceptions that people, especially students, might have regarding student funding. By now we should all have an understanding of what is meant by financial literacy as well as how this definition extends to bursary recipients. Therefore, it is now worthy to consider and debunk the incorrect information that people might have regarding bursaries.

Who qualifies for bursaries?

There is a misconception that bursaries are only granted to top achievers and/or the most financially needy students. While this is often the case, there are also bursaries with criteria that extend to students who would be considered missing middle or above average academic performers i.e overall grade point average above 60%. It is important for students to conduct research about different types of bursaries and their requirements. These different types of bursaries include but are not limited to government, corporate as well as Broad-based Black Economic Empowerment (B-BEE) bursaries. 

Students can secure these types of funding before or during their studies. This means that if you start university without a bursary, continue applying and researching as you can still secure funding to cover the rest of your university years. You can apply for the latest available bursary opportunities on the Career Wise Bursary Application Platform

Do you have to pay it back?

To answer this question, it is 1st important to understand the difference between a bursary and a student loan. The latter is defined as the amount of money that is borrowed for the purposes of furthering studies. It is a requirement that this amount is paid back including interest over once studies have been completed (i.e. student graduates) and employment has been secured to service the loan. In most cases, the student is required to repay the loan amount through monthly installments. An example of a student loan would be from the banks.

On the other hand, a bursary sponsors students financially directly or indirectly through a third-party company. A bursary covers tuition and often extends to living expenses such as accommodation, food, and books. It is important to read the bursary contract or policy to see exactly what is covered and what the expected obligation is as a student. Bursaries are awarded based on different criteria e.g. being from a specific surrounding community where the sponsor organization operates or academic discipline and performance. The majority of bursaries do not require that the student pay them back after graduating but there could be work-back the obligation.

Do you work for them after?

The terms and conditions of a bursary depending on the objective of the bursary or the type of bursary it is. The bursary contract is the best guide as it outlines all the obligations of the fundings on both the part of the sponsor and the student. For some bursaries, it is a requirement for students to pay back the funding by working for the sponsor after graduation for a time specified in the agreement. This is often considered a good thing as it guarantees students employment following the completion of their studies. However, not everyone wants to work for their funder and in those instances, depending on the agreement, a student may be bought out of their bursary agreement after graduation by the company that they want to work for.

It is important to emphasize that this requirement is all dependent on the specific type of bursary.

Multiple bursaries

Having multiple bursaries in an ethical way is permitted, while double-dipping on funding might have legal consequences. Some bursaries are capped at a certain amount and this amount might not be enough to cover the full tuition cost and accommodation for a student – in this situation another bursary may be needed to cover the shortfall. “Double Dipping” is a term for accepting compensation, funding benefits from two or more sources for the same thing, which could be regarded as unethical. A practical example is having tuition fees paid by two or more sources creating a surplus that the student will want to withdraw from the fee account. This kind of double-dipping is considered fraudulent and carries criminal consequences.

In the previous post, we defined and discussed a few points, dissecting what financial literacy is. Many students start handling “real money” once they go to varsity and are forced to be financially responsible. However, financial literacy might not be knowledge that was emphasized to all of us at a young age or at school. This means that by the time we go to varsity and possibly become bursary recipients, we might lack the necessary knowledge and skills to become financially responsible young adults.

For most of us, obtaining a bursary and getting a lump sum of money is often our first experience with independently handling such a huge amount of money. Due to excitement and lack of experience with handling a lump sum of money, you can easily find yourself mismanaging it. It’s important to understand that this money is only for your student/education-related expenses and NOT anything else. This may be the beginning of an exciting time in your student journey but this is also the perfect time to be money savvy and not splurge on unnecessary expenses.

Below we list the most common mistakes that students make when it comes to handling their bursary money:

Unnecessary groceries and eating out

It’s a great feeling of freedom knowing that you can buy what you want and not be subjected to your family’s recipes. While that may be a good time to explore your Masterchef skills, please be wary of not overdoing it. While a few treats here and there are okay, simple food is okay too. This goes for eating out and ordering in. These are all expensive activities that are not an issue per se but have the potential to be a financial strain if done excessively.

Renting an expensive apartment

This exercise will require a lot of honesty from you. The most important step is to figure out your rent budget before looking for a place to stay. Don’t get mesmerized by an apartment that is way beyond your affordability. The key is to live within your means, and most importantly, live like a student. You don’t have to live in an expensive apartment with the most modern amenities when a regular flat could be fine. You read our post about the rental housing act, to guide you on everything you need to know about student accommodation before you get your new apartment.

Living beyong of your means or budget

Given that you have limited means of income (perhaps one or two), the needs vs want decision will become extremely paramount. Do you really need to drink Starbucks coffee? Do you really need to shop for your clothes at Zara? This is not to say that we can’t splurge now and again or treat ourselves but it should be that – a treat. This means it happens once in a while and it is not an everyday thing. It is okay to buy items of a less expensive brand that may be equally good.

Lastly, this is not to say you must have a sad and horrible varsity experience – in fact, spontaneous fun is encouraged, but this requires budgeting and being disciplined so that you can actually afford spontaneous fun.

Spending more on wants than needs

This one ties with the previous point but is important to elaborate a bit. Most students fail to comprehend the difference between wants and needs. Consequently, they spend all their money on wants and do not have enough for their needs such as books, tuition fees, and necessary travel or expenses. One could need a break but may desire a vacation to Cape Town. The first is genuinely needed, the second is discretionary and expensive. Understanding the difference is essential in developing healthy spending habits.

Using bursary money for family responsibilities

As much as no one wants to see their family struggle especially if one can help lighten the load, but this is not the case when it comes to bursary money. Bursary money is for varsity or education-related expenses i.e. rent, utilities, textbooks, groceries etc. It is not reserved for family financial responsibilities such as helping extend the family house, loaning friends and family, or anything of the sort.

This will also require discipline and creating boundaries if you find yourself in situations where loved ones may expect you to take on such responsibilities.

Don’t compete with friends or give in to peer pressure

Sometimes, to keep up with their mates, you may end up spending extravagantly. It is important to avoid peer pressure while shopping. Only spend as per monthly means and avoid competing with your friends. 

A proper understanding of all of the above points may help with avoiding money mismanagement traps. However, the overall takeaway is that financial prudence is critical in financial management.

Financial literacy is the knowledge and ability to understand and then apply different finance skills. These skills include personal finance management, budgeting and saving, making investments, protecting private data, and understanding interest rates, etc. And in a world where economic value is mostly represented by monetary currency, it’s the much-needed foundation to support your relationship with money throughout your life – on campus and outside of it.

Financial well-being is the basis that helps improve your life and afford a lifestyle you want for yourself. In order to navigate the financial waters, and by extension, the business world, financial literacy is fundamental life skill.

The significance

A lack of financial literacy might force us towards unsustainable money troubles, an unfavourable credit history, increased chances of falling victim to financial fraud, and eventually, place a negative impact on the ability to live life happily.

For tertiary education students, financial literacy is key because the discipline of managing money while also being focused on your studies is tested in different ways after graduation (i.e. an academic success).

Student success shouldn’t be limited to the classroom and only be defined by academic performance. A holistic approach to success of students also relies on the provision of quality learning and development opportunities that improve their lives, both in class and in the workplace.

Ways to improve your financial literacy skills

Budgeting

Planning how your money will be spent such that you can meet all your needs is a tough balancing act. This is because tracking your spending and deciding needs from wants is challenging even in adulthood. This simple exercise will give you a clearer picture of how you use money, how you can allocate more money towards savings, or an emergency.

If you do not already have a budget, you need to start your financial literacy journey with this foundational financial skill that you will be carrying with you beyond being a student. Considerations such as: how much money do I earn (i.e. income); what exactly are my needs (i.e. accommodation, food, transport, clothes, etc) and how much do they cost; what are the nice to have things (e.g fancy phone) I want and how much will they cost, and lastly how much do I need to survive in case of an emergency are all guides in coming up with a budget.

Identity and data protection

In a digital economy, it’s expected for identity theft to rise to widespread levels.

Understanding this reality (i.e. data vs digital literacy), and having preventive measures, such as generating strong passwords and sharing your private information online sparingly can be the difference in the maintenance of safe accounts.

Prioritize Saving

Learning to save early on in life can help you gain knowledge, practice, a develop a skill set that you’ll need for the rest of your life.

Beginners can work this concept in the simplest sense, like saving money on a monthly basis for a pricey item that they want to own or a travel destination you always wanted to visit. Working towards a financial goal requires focus, and patients, which is something that can be cultivated while still being a student.

Understand interest rates

It’s important to understand different elements of finance, such as interest rates. If you have a student loan, you’ll likely deal with interest rates used in calculating how the loan will be paid back. The interest rate is the cost of borrowing money (i.e. the loan) which is payable until the loan amount is paid back in full on a monthly basis.

It’s helpful to read up on interest rates, especially the different types of interest, namely: simple interest and compound rate as they have bearing on how much it costs to pay a loan back in a given period. This is also a foundational principle to understand as it forms part of the purchase of other important things like a house (i.e. home loan) or a vehicle (i.e. car loan).

Understand debt and credit

The majority of tertiary students and inexperienced professionals often don’t carry a sharp understanding of how easy it is to ruin their credit record or credit score. It can also be difficult to build up a financial profile that enables you to access debt. In simple terms a credit records in a financial barometer on how well you can manage your personal finance (i.e. budget) and service debt.

When your personal finances are managed very well, credit can be a useful instrument to acquiring some dream assets (i.e. car or house). That’s why rushed financial decisions made as a young person can inconvenience you throughout adulthood. Hence the importance of becoming financial literate to learn and understand the concepts and tools that will help you towards responsible credit habits early in life.

Take Away

In conclusion, it is important to start your financial literacy journey while you are still young and studying. Starting early allows you to make mistakes so that you are better prepared for the big purchases in life and enjoy your hard labour.

There are different parts to financial literacy, and they evolve according to the different stages of your life. That’s the biggest reason that your financial education needs to keep evolving. Refined financial literacy skills make you aware of the implications of the money choices that you have to make.