A guide to student investing after university
Once you’ve gotten accustomed to your parents bailing you out after every big night out, and letting them finance a great three years at university, it can often be difficult to think about life once you have left. It may be the last thing on your mind, especially if you’ve got a dissertation hand-in coming up, but it’s worthwhile thinking about how you’ finance yourself once you step into the real world.
Once you’ve moved out of student accommodation, you might be dreading moving back into your parent’s house. There may be other things like a car to consider. Unlike living in the city, getting to work may not be as easy as walking. If this is the case, you’ll need to develop a savings strategy.
Everyone is different, so goals will vary from person-to-person. However, careful financial planning could help make them a reality. Personal pension provider True Potential has kindly shared their tips for students who are keen to get their finances in order sooner rather than later.
Make your goals attainable
Some of the most common goals are saving for those physical necessities such as a car or a home. However, everybody’s financial goals are different, so work out what you want to achieve.
It may seem like an odd thing to think about now, especially considering the average graduation age is 21, but you may want to start putting money into a pension plan. By planning early, you could secure a more comfortable financial position in later life.
A recent True Potential survey found that we’ll need a £23,000 annual income in retirement to live comfortably. However, UK people are on-track to receive just £6,000 per year — so it’s important to start saving or investing early to make sure we can meet our goals.
Whatever the goal, make sure it’s realistic and achievable. Define your goals as short-term or long-term.
Quantify your goals
Quantifying your goals is the next step. Work out how much you’ll need to put aside to achieve your goals and identify when you want to achieve them by. Be realistic—trying to put away too much over a shorter timescale can place unwanted pressure and stress on both you and your finances.
Create a budget based upon your incomings and outgoings
Consider your current financial situation and create a budget. Work out your monthly income against your monthly expenses such as standing orders and Direct Debits. Understanding how much you’re spending on bills and other expenditures such as utilities, food, and entertainment will allow you to gain a crystal clear picture of how much you can comfortably put aside in any given period.
Make sure that one-off payments such as insurance and maintenance costs are accounted for within your budget. Only by painting a true and honest picture of your current financial situation can you create a representative budget.
By establishing exactly how much you’re spending each month, you can work out where you can make every day savings. Purchases like buying a coffee every day can begin to add up. Couldn’t you make a coffee at home before you leave the house? Establish how much money you can actually put away without having to compromise your spending too much.
Once you’ve done the sums, you’ll need to choose the right investment product to support your financial goals. ISAs (individual saving accounts) are a popular choice, as they are a tax efficient way to save.
Stocks and Shares ISAs are one option if you’re looking for potential growth. Your cash is invested in bonds, property or stocks and shares, so you could get back more than you pay in. However, risk is involved and you may get back less than you pay in.
At the end of the day, choose the saving or investment option that works for you. Consider what you’re working towards and the level of risk you’re comfortable with.
This article is sponsored content.