Pratiksha Prabhu, a money, banking and finance student at the University of Birmingham Dubai, receives a monthly allowance of approximately Dh200 ($54), which she uses prudently to manage her budget.
“I live with my parents and they cover the rent and food expenses, but if I go outside to some events, they give me a certain allowance,” says the Indian resident, 18, who is an aspiring financial analyst.
“I did an internship over the summer and received some income from it. I find it easy to budget because I’m a finance student.
“Before I go out, I set myself a budget that I’m going to spend only Dh50. If I go over that threshold, it’s fine since I have excess balance, but if I don’t, I can use that money for something else later.”
Ms Prabhu’s family is also finance-focused and they taught her how to manage money well and to invest.
Research has shown that children begin to develop money habits from an early age. Early financial education can help to foster strong money management skills in adulthood, experts say.
However, only 53 per cent of 30,000 students from more than 440 colleges across the US said they felt prepared to manage their money, according to a 2019 survey by digital education platform Everfi, sponsored by AIG Retirement Services.
Only 35 per cent of students reported having ever taken a personal finance course in high school, the survey found.
When asked what they plan to accomplish in the next year to help manage their finances and prepare for the future, only a third (34 per cent) reported they would balance their cheque book while 32 per cent said they would start building an emergency fund, the findings showed.
A 2019 financial literacy survey by Visa showed that 43 per cent of respondents in the UAE aged between 16 and 24 felt they were not ready to manage their own money, while 53 per cent said schools did not prepare them enough to take care of their finances.
Ms Prabhu say she was taught the basics of personal finance in high school, such as how to budget and what is a credit card and debit card.
Her university brought in financial education provider KFI Global to teach students on how debit cards and credit cards work in the UAE.
She recalls learning how credit cards are among the most expensive loans on the market as they charge a 24 per cent interest rate annually.
“Ever since I was 10 years old, my mum talked to me about budgeting for groceries. By involving me in the process, my parents taught me that money is something that can be managed and not to be scared of,” she says.
“When I had money from my internship, I gave it to my father, who keeps it in different savings accounts. Once I start earning, I plan to give part of it to my father to invest. I’m trying to learn about stock market investments.”
The teenager, who is collaborating with a few friends to create a financial education blog called FinSolers, is also participating in the Bloomberg Global Trading challenge from her university.
“Now I realise that investing in the stock markets requires so much research. You cannot just dump the money and expect it to grow,” she says.
Although Ms Prabhu has a debit card and account with Liv, Emirates NBD’s digital-only bank, she prefers to use cash.
“I’ve noticed that if you have a card, you won’t be able to track your expenses and cannot do the mental maths,” she says.
“If I need to have a credit score, then my bank account should not be linked to anyone else’s. I persuaded my parents that I want to have a separate bank account, so that I'd be able to learn money management skills effectively.”
She also feels that the importance of building a good credit score is not talked about a lot in the UAE, while there is a lot of discourse around it in the US.
Ms Prabhu says she does not succumb to peer pressure. When she feels something is beyond her budget, she admits it to her friends and may consider buying the item later. Occasionally, she and her friends also split expenses when they visit restaurants, bowling centres and arcades.
“My friends and I discuss many money topics. We usually talk about how things are very overpriced, especially food, how inflation is affecting the economy, what to do if we win money in a draw, among other things,” she shares.
She also tries to avoid falling into the trap of buying items on sale.
The teenager also shares one of her saving strategies. Although Ms Prabhu loves croissants and sodas, she stops herself from buying them when the craving comes and, instead, saves the money in a cash box or separate account.
She says the idea also works with big purchases.
“For instance, if I want to buy a cute dress but feel this is not the right time, I set aside that money in a separate account and if a sale comes up and the dress is available for a cheaper price, I will buy it,” she says.
Similarly, Arooha Khan, a final-year journalism student at Middlesex University Dubai, says having a priority list helps her stay within budget and not overspend.
The Pakistani resident, 21, took up two internships and now works as a freelance copywriter for a beauty products retailer.
“I don’t depend on my parents any more. They try to encourage me to save money for my further education,” she says.
“I save money in two student saving accounts with Liv and Abu Dhabi Islamic Bank.”
Ms Khan’s top spending priority is transport to and from her university, so she makes sure she has enough to pay for Metro rides, petrol or parking.
Since she is a creative writing and journalism student, she also needs to purchase books frequently, so she spends on a library subscription instead.
The Gen Zer makes a spreadsheet every month where she divides her money according to her priorities. Before this, when she received an allowance from her parents, she used the envelope technique to budget.
“It was easier to manage money that way since it helped set clear boundaries for spending. I exercise the same discipline now with a spreadsheet,” she says.
“I learnt the envelope technique from YouTube and the 50:30:20 method from university. Under this method, I spend 50 per cent of my money on my needs, 30 per cent on my wants and then 20 per cent for savings.
“I try to incorporate this method because I want to be more financially responsible. When you have a clear division, you know where your money is going and you’re much more responsible.”
Ms Khan also recalls how she was a victim of peer pressure. She noticed that she had become a hoarder while moving homes and her bank account was near zero.
“I realised that succumbing to peer pressure would only make me broke. I also want to be more minimalistic,” she says.
“Peer pressure is difficult to get out of, but when you surround yourself with the right company, you’ll realise that it’s not worth it. We need to put ourselves upfront and realise what our needs, wants and priorities are.”
Ms Khan saves money by only buying items, especially clothes, on discount. She buys all her clothes during Christmas or New Year sales because they are heavily discounted.
“I’m trying to avoid fast fashion, in general, since it’s not sustainable to buy clothes all the time. I buying fewer pieces per year,” she says.
She also tries to save money for other priorities such as birthdays and concert tickets.
We asked personal finance experts to share their top tips on how college students can manage their finances more effectively.
Create a budget and set up an emergency fund
While budgeting may not be fun, knowing how much you have to spend can help you avoid most financial mistakes that people make, according to Will Rainey, founder of Blue Tree Savings, a company that helps parents teach their children about money, and the author of Grandpa’s Fortune Fables.
At the very least, students should have a spreadsheet to capture how much money they have in each of their accounts on the first of the month and see the difference each month, he suggests.
Make sure you include “saving” as part of the budget and save before you start to spend, he adds.
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“Start by outlining your monthly income, which may come from sources like part-time work, allowances or scholarships,” says Sophia Bhatti, director of Dubai-based Wimbledon Wealth.
“List your monthly expenses, including tuition, rent, groceries, transportation and leisure activities. Allocate a portion of your income to each expense category and stick to your budget.”
She also suggests using apps or spreadsheets to monitor expenses regularly. This will help identify areas to cut back.
Students should also set up an emergency fund to cover unexpected expenses such as medical bills or urgent repairs. They should aim to save at least three to six months’ worth of living expenses, she adds.
Find ways to earn money
While living off a student loan is nice, there is a risk that this money is seen as “free” and, therefore, not valued, Mr Rainey warns.
Working a part-time job or finding ways to make money helps students understand the value of money and, therefore, makes them more likely to look after it, he suggests.
“If you have student loans, be sure to understand the terms and repayment options. Consider paying off high-interest loans first,” Ms Bhatti recommends.
Avoid credit card debt
Be cautious with credit cards. If you use one, pay off the balance in full each month to avoid high-interest charges, Ms Bhatti says.
“Before making a purchase, especially for non-essential items, ask yourself if it’s a need or a want. Avoid impulse buying,” she says.
Credit card and buy now, pay later companies will highlight their products’ benefits, but all students need to spend time learning about the downsides, Mr Rainey instructs.
If not, it is easy for students to start spending money they do not have and forming poor spending habits, he warns.
Be cautious with student discounts
Take advantage of student discounts offered by local businesses, transport operators and online retailers, Ms Bhatti says.
“But remember that you are only saving money if you were going to buy the discounted item before you knew it was discounted,” according to Mr Rainey.
“If you weren’t going to buy it before the discount, don’t buy it. Companies want you to spend all your money and, hence, provide these discounts.”
Apply for scholarships
Apply for as many scholarships as you can, Mr Rainey suggests.
“Most people don’t appreciate how many scholarships are available to them – they aren’t just for gifted or underprivileged students. Spending a weekend searching and applying for scholarships could save thousands,” he advises.
Learn about money
Students must invest time in learning about personal finance. There are many online resources, books and courses available, experts say.
Spend time reading books such as Rich Dad, Poor Dad, The Richest Man in Babylon and The Psychology of Money, Mr Rainey suggests.
These books can be life-changing and ensure that the money you earn with your degree is put to good use, he says.
Other money-saving tips
Cooking your meals at home is often cheaper than eating out or ordering takeout, according to Ms Bhatti.
Look for cost-effective housing options such as shared accommodations or on-campus housing, she says.
Start thinking about your long-term financial goals, such as saving for retirement or higher education. Even small contributions early on can make a significant difference, says Ms Bhatti.
“Remember that good financial habits developed during college can set the foundation for a secure and prosperous future. Tailor these tips to your specific circumstances and financial goals, and consistently review and adjust your financial plan as needed.”
