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Financial planning for students - A successful start to your career

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Financial planning for students - A successful start to your career

During their studies, or at the latest when they enter the workforce, many young people begin to seriously consider their insurance and finances for the first time. However, budgets are often limited during their studies, so insurance and investments should be carefully planned. Well-thought-out financial planning is crucial for structuring, understanding, and managing financial matters for the long term. We'll show you what's important when it comes to financial advice for students.

Financial advice for students - What really matters

University studies mark the beginning of your professional career. From here, you'll climb the career ladder, which may involve further training, job changes, and possibly relocations. Your education – in this case, your university studies – represents the first significant milestone. Regardless of your chosen field of study, most students share a common challenge: money is scarce and is often spent on other expenses rather than savings. Investments seem unattractive, and insurance is frequently neglected. However, we want to emphasize: as a student, you don't have to manage everything. There are, however, key areas you shouldn't overlook. These include addressing major financial risks and building a solid foundation for your entry into professional life.

1. Strategic Finance - Effective Budgeting

Whether you receive BAföG (German student financial aid), earn a part-time salary, or receive a training allowance during a dual study program, it's important to manage these funds carefully and use them wisely. To keep your finances under control, it's advisable to set up a main account with several sub-accounts. This way, you can have one account for fixed expenses and a separate one for living costs such as food and clothing. You can also create sub-accounts for leisure activities, savings, and personal desires like travel to manage your budget effectively.

The golden rule is to never spend more than you earn. Therefore, avoid debt. A clear tip: avoid overdrafts! If it is absolutely necessary, limit your overdraft to a maximum of 300 to 500 euros.

2. Develop savings strategies

If you still live with your parents, you have more opportunities to save as a student compared to those who have to finance their own apartment. Even with a limited budget, it's worthwhile to put small amounts aside during your studies. This way, you can gradually build up a financial cushion, create reserves, and enable yourself to fulfill both small and large wishes. A financial advisor like our experts at Badent & Klemm Consulting can help you save and invest wisely, even with a limited budget, for example, through an ETF savings plan.

3. Invest savings wisely

ETF stands for Exchange Traded Fund and is a fund traded on stock exchanges that invests in a wide range of assets such as stocks, bonds, or commodities, often based on a specific strategy or index. A savings plan allows you to regularly invest a fixed amount in this ETF, for example, monthly. The advantage here is flexibility: you can adjust the savings amount if your budget is tight or you have more available. You can also withdraw capital from the savings plan at any time to fulfill personal wishes. There are various ways to invest your savings, with an ETF savings plan often being a recommended option. However, depending on your individual needs and financial resources, other investment opportunities are also available.

4. Taxes and tax return

For many students, filing a tax return offers considerable savings potential. There are various ways to claim expenses as tax-deductible and receive money back from the tax office through tax refunds. For example, travel expenses to university, textbooks, and even computers can be claimed on the tax return.

Filing a tax return can be particularly advantageous for students if their income is below the basic tax allowance (2024: 10,908 euros).

5. Mitigate risks: Your insurance policies

Most students don't want to deal with insurance. Even less do they want to pay premiums for something they don't think they need. However, it's always better to pay for insurance you don't need.

First and foremost, protecting your earning capacity is crucial. In most cases, disability insurance is the right choice. This pays a monthly pension if you are unable to work due to health reasons. Even as a student, you are optimally protected with disability insurance.

Furthermore, you should consider taking out personal liability insurance to protect yourself against third-party claims for damages. If you accidentally cause harm to someone, you are legally obligated to pay compensation. Personal liability insurance covers personal injury, property damage, and financial losses.

Tip: Under certain circumstances, you can remain insured through your parents' insurance and do not need to take out your own insurance policy.

Students can choose between statutory and private health insurance. Private health insurance is particularly advantageous if you plan to remain privately insured after graduation, for example, if you are aiming for a career in the civil service. This allows you to secure affordable premiums as a student. Those with statutory health insurance can supplement their coverage with additional health insurance to receive better benefits for dental treatment or hospital stays.

Tip: Students with statutory health insurance may be able to use their parents' free family insurance and remain insured without paying contributions until they reach the age of 25.

Depending on your life situation, other insurance policies may be useful, such as household insurance if you already live in your own apartment, car insurance for your car, motorcycle or scooter, or legal expenses insurance for legal matters.

Do students need retirement savings?

The question of whether students need retirement savings is frequently debated. It's well known that saving early pays off. The earlier you set aside money for retirement, the longer you can benefit from interest and compound interest, and the less capital you need to raise overall. On the other hand, you should ensure that you can afford retirement savings in the long term without getting into financial difficulties. Especially for students with limited budgets, retirement savings can be temporarily postponed.

However, by choosing the right savings strategy, you can combine saving and retirement planning. An ETF savings plan is a good option here, as it is suitable for both long-term wealth accumulation and short-term savings goals.

When advising students on financial matters, retirement planning should always be a consideration. It's important to take into account not only their financial resources but also their career goals. Students aiming for a career in the civil service, for example, have different needs than employees or the self-employed. A flexible retirement savings strategy is therefore particularly suitable for students.

Financial advice for students is a useful form of support.

Financial advice for students offers valuable support in organizing their finances and managing a limited budget effectively. Even small amounts can be used to build a solid financial cushion through smart investments. The right insurance policies also help ensure a smooth start to professional life.

Whether it's about financing your studies, avoiding debt, saving and investing early, or retirement planning – competent financial advice for students helps you make the right financial decisions and achieve your long-term goals. Our advisors at Badent & Klemm Consulting are ready to support you. Feel free to contact us for more information!