Summary of this article
For many young people, studying abroad is also the first time they will have to manage money on their own. They may be living in a different currency, paying their own bills, using a bank account in another country and deciding how much they can afford to spend each week.
A little preparation before leaving home can make that transition much easier.
Knowing the full cost of the course, understanding currency conversion and fees, keeping an emergency cushion and simply paying attention to where the money goes can prevent many avoidable problems.
Getting admission to a university abroad is a big milestone. There are applications to complete, a visa to secure, flights to book and a long list of things to pack. Money, however, is one thing that often gets pushed down the list until the student is actually ready to leave.
For many young people, studying abroad is also the first time they will have to manage money on their own. They may be living in a different currency, paying their own bills, using a bank account in another country and deciding how much they can afford to spend each week.
A little preparation before leaving home can make that transition much easier. Here are 10 money lessons worth knowing before boarding that flight.
1. Tuition Is Only The Beginning
When families calculate the cost of studying abroad, tuition is usually the first number they look at. But once the student gets there, a long list of other expenses starts showing up.
There is accommodation, food, insurance, visa fees, flights, local transport, utilities and everyday spending. Then there are expenses such as deposits, books and course materials that may not be obvious at the beginning.
“So instead of asking, 'How much is the tuition?', work out what the entire year is likely to cost. That number will give you a much better idea of how much money you actually need,” says Gagan Malhotra, COO, BookMyForex.
2. Sort Out The Money Before You Leave
The first few days at a foreign university can be overwhelming. You are finding your way around a new city, attending orientation, meeting people and settling into a new routine. The last thing you want at that point is to be worrying about how to pay for your accommodation or where to get cash.
“Before leaving, work out how you will access your money, how much you will need initially and what banking arrangements you will need once you arrive. Keep some money readily accessible for the first few days rather than assuming every payment can be made through one method,” advises Malhotra.
3. A Small Exchange-Rate Difference Can Become A Big Amount
A few paise or even a rupee difference in the exchange rate may not seem important when you are converting a small amount. It can look very different when you are paying tuition or transferring money regularly for three or four years.
This is particularly relevant for families sending money from India to fund a child's education overseas. The exchange rate will not remain fixed throughout the course, so large transfers should not always be left until the last minute.
4. Don't Look At The Exchange Rate Alone
A rate that looks attractive on the screen does not necessarily mean it is the cheapest transaction.
There could be a transfer fee, bank charge, card mark-up or ATM fee sitting somewhere in the fine print. Individually, these amounts may look small. Over several years, they can add up.
The easier way to compare different options is to ask one question: How much will actually reach the student's account after all charges? That is more useful than simply comparing the headline exchange rate.
5. You Don't Have To Use Just One Way Of Paying
Students often assume they need to pick one payment method and stick with it. In reality, different expenses may call for different options.
“A forex card may be convenient for everyday purchases when you first arrive. A local bank account can become useful for rent, bills and other regular payments. Tuition, on the other hand, may be better handled through a bank transfer because the amount involved is much larger,” says Malhotra.
“The important thing is to understand the charges and limitations of each option. What works well for a student in one country may not make as much sense in another,” he adds.
6. Just Because You Can Borrow More Doesn't Mean You Should
Education loans can make overseas education possible for many families. But taking the maximum loan offered by a lender simply because it is available can create unnecessary pressure later.
Before borrowing, look at the money already available through family savings, scholarships, grants or other sources. Then work out the actual shortfall.
The objective should not be to borrow as much as possible. It should be to borrow what is genuinely needed and understand what that loan will cost after graduation.
7. Keep Some Money Aside For The Expenses Nobody Talks About
University brochures are good at telling you about tuition and accommodation. They may not tell you how much it costs to buy a winter jacket when you come from a warm country, replace a laptop or pay a security deposit.
There can also be expenses for textbooks, local travel, visa renewals, course-related software, field trips or other activities.
These costs may not occur every month, but they can make a noticeable dent in a student's budget when they do. Make a list of possible one-off expenses before leaving and keep some money aside for them.
8. Keep An Emergency Fund And Don't Treat It As Spending Money
Things go wrong even when you have planned carefully. A student may fall ill, lose a phone, damage a laptop or suddenly need to travel home.
“That is why an emergency fund is particularly important when living abroad. It should be kept separately from the money meant for rent, food and tuition. There is no universal amount that will work for everyone, but having enough to cover two to three months of essential living expenses can provide a useful cushion,” observes Malhotra.
9. Stop Converting Every Coffee Into Rupees
This is something many students do when they first arrive abroad. A €4 coffee can suddenly feel expensive when you mentally convert it into rupees. The same happens with a £15 meal or a $50 grocery bill. For the first few days, this comparison is natural. But doing it for the entire course can make budgeting unnecessarily confusing.
Once you settle down, start thinking in the local currency. If you have a monthly budget of €1,500, for example, focus on how much of that €1,500 you are actually spending. That will give you a much clearer picture of your life there.
10. Your First Budget Will Probably Be Wrong
This is perhaps the most important lesson. The budget you prepare while sitting at home in India is based on estimates. Once you reach the university, reality takes over.
You may discover that groceries cost more than expected. So, find a cheaper way to commute or realise that eating out with friends is taking up more of your budget than planned. Some semesters may also bring additional expenses that you had not anticipated.
There is nothing wrong with changing the budget. Review it every couple of months, see where the money is actually going and make adjustments. The aim is not to follow the original budget perfectly; it is to know where your money is going.
Conclusion
Studying abroad comes with a lot to look forward to, but it also comes with a new level of financial responsibility. For many students, it is the first time they are making everyday money decisions without their parents standing behind them.
“Knowing the full cost of the course, understanding currency conversion and fees, keeping an emergency cushion and simply paying attention to where the money goes can prevent many avoidable problems,” says Malhotra.
The idea is not to make students worry about money all the time. It is to make sure money does not become a problem when they should be concentrating on their studies, friendships and the experience of living in a new country.
