The Blog

Why Marshmallows and Money Are the Key to Success

Understanding the repercussions of everyday financial decisions is just the starting point for good money management. This, along with techniques such as budgeting and making the most of their income, enables students to become 'future capable.'

The National Union of Students estimated that in 2012-13, the total average expenditure for a university student living and studying in England (outside London) was £22,189 per annum. This figure comprises tuition fees and living costs, including accommodation, food, personal items, leisure and travel.

This is an eye-watering amount of debt and we need only look across the pond to see just how bad this situation could get. In the US students owe an accumulated $1.2trillion (that's 12 zeros!!) which last year overshot the national credit card debt.

Students owe more money for their education than the whole rest of the country owe on credit card.

The fact that so much debt rests on the shoulders of young people, still learning how to manage independent living, is worrying indeed.

An increase in fee cap to £9,000 in 2012-13 has resulted in larger average loans and an increase in the average loan duration, so has the time come to adopt a structured approach in making students 'money smarter?' Is it time to consider critical life skills and ensuring they are accessible, results driven and independently produced?

The scenario of our university graduates having to shoulder this debt with limited money management training is unthinkable, and begs the question of how well young people will cope financially in the future.

An investment rather than a burden

Paying for higher education is an investment, and remains a popular choice even with the increase in tuition fees in England. A report by UCAS in January this year, highlights a 4% increase in applications for higher education compared with last year.

This figure indicates a firm belief in the value of university education, despite the debt that will be incurred, and a willingness to carry this financial burden forward into adulthood.

Students aren't being frightened off by fees but they remain anxious about debt.

While many students are still baffled by the new fee regime, it is the confusion over debt which can cause a lifetime of pain. Few students can articulate the difference between 'good' and 'bad' debt leading to excesses of credit card debt and payday loans and, most critically, a failure to understand debt as a powerful tool in the quest for social mobility.

Proper financial management training can help students deploy their funds in the most efficient ways and utilise debt most effectively. Students would be best able to identify manageable debt, as represented by their tuition loan, while guiding them away from more dangerous debt which compounds faster than it can be paid off.

The repercussions of not clearing a credit card bill at the end of each payment period are often not understood by young people using credit for the first time. When realisation hits, it can be too late to manage the situation quickly and efficiently. Far too many people, students and those who have been in the workplace for years, are often uncomfortable seeking help.

Flexible financial learning

So what can universities and colleges do to help their students understand the various types of debt, showing them how to manage their finances in a way that keeps the 'bad' debt at bay?

Online, onsite, flipped and right way up, engaging and empowering programs can help students make well-informed decisions. Importantly too these initiatives can empower students to understand the consequences of their decisions and take responsibility for the outcomes.

The 1960s Marshmallow Test (see this TED talk) found there is a direct correlation between that those who can exercise self control, demonstrating delayed gratification, and success in later life. So becoming financially capable is not just a necessary financial skill for life but a foundation of future success.

And it is not just students who benefit from such education. Education institutions are winners too.

Students who are anxious about debt are more likely to suffer from depression which impacts on attainment and retention. Additionally fear of debt can disproportionately affect non-traditional students impacting on widening participation and access initiatives.

Becoming 'future capable'

Understanding the repercussions of everyday financial decisions is just the starting point for good money management. This, along with techniques such as budgeting and making the most of their income, enables students to become 'future capable.'

Our young people have enough to cope with simply working towards their degree, without experiencing demoralising money worries. It is a fact though, that 4 out of 5 students do worry about money at university.

It would be wrong to overlook the importance of teaching money management techniques at university and the naysayers who say we are fighting a losing battle do a diservice to young people who are aspirational and determined and entitled to the same opportunities as past generations..

Good financial management is a fundamental life skill that has to be taught, and not simply left to chance in the hope that students will be able to cope.

So at this midway point of National Student Money Week (coordinated by NASMA) check out the stuff happening on campus, ask for guidance from student advisers and take control of your future. After all, no one else can do it for you.