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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.