Investments  

How should graduates start on their finances?

  • Describe the financial predicament of recent graduates
  • Identify certain ways graduates can help themselves when seeking information
  • Describe the tax advantages low earners have
CPD
Approx.30min

The number of people out of work fell by 13,000 to 1.281m and the employment rate rose to an all-time high of 76.2 per cent.

The finance sector remains a major employer, with over 1m people in the sector in 2018.

And in London jobs are set to grow – good news for our graduates.

So, on the employment front, the prospects are good, providing the right job can be found in the right part of the UK.

However, challenges for lifestyle and repayment of student debt remain.

Once in the workplace, one of the major worries for graduates is to save for the future.

Those in the survey listed saving for a deposit on a home as their number one priority, followed by a car and maintaining a good standard of living.

Quite a few students mentioned building a good credit score but only 4 per cent mentioned pensions.

What can advisers do to help?

Leaving university is a vitally important time in a young person’s life.

They are under huge pressures from debts, getting on the housing ladder, starting a new career and all the other lifestyle pressures they are up against.

Due to the nature of advice, they are often overlooked and can easily fall into the advice gap.

Giving some basic advice, as these young adults get started on their financial services journey, could well mean the start of a long and happy relationship – which sees them come back for further help and advice time and again as their needs grow and their circumstances change.

Remember, these are tomorrow’s professionals, business leaders, and key influencers in society – helping them get on the right road to a bright financial future could pay dividends in future years.

Here are a few of the areas you could help them with.

Managing student debt

According to the Institute of Fiscal Studies in 2017, the average student in England will graduate with debts of over £50,000.

Those from poorer backgrounds will incur more, with more loans available to them.

How much interest is payable will depend on the current UK Retail Price Index (RPI) and their employment circumstances. As of April 2019, RPI sits at 3.3 per cent.

While studying, and until the April after they leave their course, interest will be RPI plus 3 per cent. After this period, the rate of interest they pay varies depending on how much they are earning: £25,725 or less, interest will be equal to RPI; between £25,725 and £46,305, interest will be RPI plus up to 3 per cent, on a sliding scale based on exact salary.

Over £46,305, interest will be RPI plus 3 per cent.

They will not have to pay anything back until they earn above the repayment threshold, but the interest will continue to tick over in the background.