University students are being urged to try a TikTok budgeting tip to help keep their bank accounts healthy.
Scores of people have been sharing the ‘50-25-25’ money saving rule on the social media platform to help budget more effectively. Now, Simon Thompson, at Accommodation for Students, has explained the method.
He said: "With 85,000 likes and counting, the 50-25-25 rule is a popular saving trick making waves on TikTok. With the social platform hugely popular among the Gen Z generation, it’s no wonder that the hack is working particularly well for students who are new to the premise of paying bills, rent, and the everyday financial responsibilities that come with living alone.
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"Students are likely to have a variety of part-time employment opportunities while studying, and this savings hack is ideal for budgeting outgoings whether they are paid bi-weekly, monthly, or even at the end of a shift. The 50-25-25 rule involves the creation and maintenance of three separate accounts - one for monthly rent, bills and short-term savings, one to build long term savings for the future, and one for general day-to-day spending.
"For the account used to pay off monthly expenditure, students should work out the payments they need to prioritise on a monthly basis. This will include such necessities as mobile phone bills and car insurance payments.
"The idea is that for every payment received, whether it be from a job or a student loan instalment, students apply the 50-25-25 rule to each of the accounts, with the rent and bills account receiving 50% of that incoming payment. For example, if hypothetically a student is paid £1,200 in a month, £600 would be paid into the rent and bills account. Then £300 would be directed to the long-term savings account, and the remaining £300 can be used for general spending and student lifestyle expenses.
"It is essential to ensure that long-term savings are off-limits for the time being. This allows the student to store as much away as possible for a month where they don’t earn as much, or need to dip into their longer-term savings to cover an unexpected bill or expenses.
"For students that haven’t grown up sticking to the rules of budgeting, this is a simple and easy-to-follow process that will help to ensure they don’t rely too heavily on their overdrafts, credit cards or BNPL (buy now pay later) payment schemes. All of these can put them at risk of spiraling into financial debt before they’ve even graduated."
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