Financial awareness and scams
Managing your money as a student often means making difficult financial decisions. Financial mistakes are costly and can have long term implications. Equipping yourself with knowledge will help you make wise financial decisions, avoid risks, and protect yourself from fraud.
Credit associated risks
Credit cards can be a useful tool for managing your finances and building up your credit score for the future. However, there is also a risk of building up an unmanageable debt if you are not aware of potential pitfalls
- Avoid spending more than you can repay within the 0% interest period
- It is important to understand the terms and conditions, such as extra charges, if you go over the limit or don't pay your balance off in time
- Be aware of promo deals that can encourage you to spend more than you have
Overdrafts can be helpful to make ends meet before your next student loan payment or to deal with emergencies. However, it is important to keep in mind that it is a debt, and you may be required to pay it back with interest. Here are few things to consider to keep your overdraft under control
- It is best to borrow only as much as absolutely necessary
- Try making a plan in advance on how you will repay it
- It is a good idea to closely monitor your balance
- It is important to understand the transaction fees and charges
Buy now, pay later schemes
Buy now, pay later services are presented as a simple way to help you spread out the cost, however this is still a debt, and it is worth taking the following into consideration before using these services
- Are the terms and conditions clear?
- Can you afford it?
- Do you have a plan on how and when you are going to pay it back?
It is important to keep track of what you owe and make the repayments on time. There is usually a fee if you miss a repayment. Your details might also be sent to debt collectors and credit agencies, which could affect your credit score.
Investing and trading
Both trading and investing require solid understanding of the principles and thorough assessment of associated risks in order to make calculated decisions.
Cryptocurrency has become increasingly popular with investors for various reasons but like with any investments it is important to do your research. Here are the risks of investing in cryptocurrency outlined by Financial Services Compensation Scheme
- Volatile - crypto market value can be extremely volatile; hence you could lose a lot, very quickly
- Hard to spend - very few sellers will accept cryptocurrency as payment
- Intangible - only exists in a digital peer-to-peer network
- Unregulated and unprotected - if your funds are stolen, there is no easy way to get your money back
Here are a few things to consider before investing in cryptocurrency
- Make sure to understand how it works before spending any money
- Learn how to store digital currency safely and recognise a scammer
- Be aware of additional fees
- Understand your risk tolerance and mental health implications
- Check if you can withstand a loss
There are certain risks and questionable new trends involved in trading activity that worth to be aware of
- Shorter time horizon (the length of time until the point you need to withdraw your funds) means that assets are less likely to recover from loss.
- ‘Meme trading’ is risky due to an asset increasing in volume not because of a company’s performance, but rather because of hype on social media and online forums.
- 'Finfluencers' may not be knowledgeable or could be sponsored by trading platforms.
- Not all platforms are Financial Services Compensation Scheme (FSCS) authorised, which exists to protect customers of financial services firms that have failed, meaning that the investor/trader’s money is unprotected.
- There are often hidden fees associated with having a trading account.
- Some trading apps are gamifying investing and luring traders to take on inappropriate risk.
- Ignoring fundamental investment practices and risk management techniques dilutes the difference between trading and gambling.
Finally, if you decide to invest/trade during your time at university you would need to consider how quickly you can access the money tied up in investments and whether you are prepared to liquidate the assets even at a loss if you are struggling financially.
If you are interested in investing and trading, you may find educational resources on Investopedia useful.
Fraud and scams
Scams are getting more sophisticated and, unfortunately, a lot of them are targeting, specifically students. Here are few examples to help you recognise potential scams
- Phishing scam about student finance - victims are tricked into giving away personal information, like bank account details.
- Tax scams - victims are offered fake tax refunds or help with claiming Covid-related financial support.
- Rental fraud - potential tenants are tricked into paying an upfront fee to rent a property but, the property does not exist, has already been rented out, or has been rented to multiple victims at the same time.
- Money mules and money laundering have evolved from asking victims to deposit cash and then transfer funds for a small reward to tricking victims into money laundering unwittingly through fake job adverts. It is important to remember that money laundering is illegal and can result in jail time.
- Games laced with hidden malware - hackers are using gamers to become crypto-rich by offering them to download free games on forums. The codes of the games contain a piece of crypto-mining malware called Crackonosh which secretly generates digital money for hackers once the game has been downloaded.
- Essay writing scams are unethical and put students at risk of failing their degree.
Some of the common job scams include
- Fake job adverts which extract personal information from applications
- Advance fee for fake admin charges
- Premium rate phone interviews charging victims for being on hold for hours
- Identity theft by fraudulent employers asking for copies of personal documents as pre-employment checks
There are several external resources that you can use to equip yourself with essential knowledge for identifying scams and protecting yourself. There are also organisations that can help you if you have become a victim of a fraud.
- MoneyHelper offers a practical guide on scams
- The National Cyber Security Alliance provides advice on how to stay safe online
- Action Fraud is the UK’s national reporting centre for fraud and cybercrime, visit their website to learn about potential fraud and to report if you have been scammed
- UKCISA has specific information about frauds and scams for international students
- Citizens Advice scams awareness month is a place to find out more about scams, share stories with other people and learn how to protect yourself against these practices
- Blackbullion composed a phone scam cheat sheet to help you quickly identify a fraudulent call
Suggested Blackbullion learning
Blackbullion is an online learning platform that you can access for free with your Hallam email address and improve your money skills through pathways, articles, and tools. We recommend that you complete the below modules to help you further develop your financial awareness
- Credit cards guide can help you understand how credit cards work and what are the potential risks
- Guide to overdrafts will allow you to gain a deeper understanding of overdraft benefits and drawbacks
- Debt pathway is designed to help you create manageable credit plans and avoid debt anxieties
- Risk pathway explores potential financial risks and offers practical tips on making wise financial decisions
- By completing the scams pathway, you will learn practical tips on recognising scams and protecting yourself
- The article on buy now, pay later will help you make an informed decision whether to opt in or not
- Investing 101 pathway is a good place to learn about fundamental concepts before even considering investing any money