Personal finance tips and tricks for Finnish university students

Overall Finland is a good country for students. We get a free education (even university is free) in one of the best school systems of the world and some really nice social benefits as a student, such as financial aid, housing allowance and a student loan that we don’t even have to pay fully. 

However, at the same time Finland is one of the most expensive countries in the world which means that as a student with limited income, you have to play your (financial) cards wisely. 

How to obtain financial advantage while studying at university? 

Usually, when people think about studying at university, they think about all that freedom enjoyed by young people, but also how expensive it is. In Finland, studying in university or in polytechnic (university of applied sciences) is generally free, but still, most people end up taking student loans and/or rely on their parents for financial aid. Social benefits for students are simply not enough for most students in Finland. 

However, students can learn valuable financial skills for the future during their university years. There are many ways how students can obtain a financial advantage while studying. I have personally been a Finnish university student. So I know from my own (and friends’) experiences some tips & tricks for how you can make the most of your studies financially.

Tip 1: Take student loan

If you are going to graduate from a Finnish university or from a Polytechnic on time (or even 0.5-1 year late), you should definitely take advantage of the Finnish student loan system. This is a no-brainer because of the student loan compensation. The student loan is a government-guaranteed loan for which you can get a maximum of €650 per month. However, I would advise to not take more than €18,000 (the maximum amount which is covered by the compensation) of student debt (unless you use it as an investment loan). 

The student loan compensation means that Kela (Finnish social service agency) pays back part of your student loan if you graduate from university in 6 years and from Polytechnic in 3.5 years. The maximum amount of compensation is €6,200 (- interest which is less than 0.5% yearly). To be able to claim €6,200 (- interests) of compensation, you need to take no more than €18,000 of student loan and graduate on time. 

Tip 2: Learn budgeting and track your expenses – and buy your groceries from big supermarkets or from Lidl

Do you know how much you spend every month? Probably not. Learn how to make yourself a monthly budget and track your spending so you know if you hit your targets or not. Here are some great tips for budgeting. There are many ways to track your expenses. You can your online bank statements, wallet apps or simply Excel. If you’re as obnoxious meticulous as some people at sulonorth, use YNAB

Food is expensive in Finland, and it is especially expensive in small, urban grocery stores. Bigger supermarkets like Prisma or the German grocery store Lidl are the best options. The more often you got to a grocery (or any other) store, the more stuff you buy on impulse. That is why it’s good to have a list and go to a grocery store only once per week if you can 🙂

Tip 3: Find a cheap accommodation

Your rent is probably the biggest monthly single expense you will have during your studies. The cost of living is rising in big cities in Finland. Luckily, every city with a university or a polytechnic has a student housing foundation. However, it might be hard to get a studio apartment in your freshman year through a student housing foundation. Dorm rooms are easier to get and they are very cost-friendly. On top of that, you get to meet new and interesting people. Outside of student houses, there are still many options for housing.

As a student in Finland, you are also entitled to get a general housing allowance that covers some of the housing costs depending on where you live and do you live alone. Note: if you move in with someone (e.g. your partner, friend), you are seen as one household (unless you have separate rental agreements, like in student dorms), thus you only get one housing allowance per household. 

Tip 4: Find yourself a part-time work or work full-time during summers

In Finland, studying at University or at Polytechnic is nearly free which means that you have plenty of free time. Of course it depends on your field of study and major, but generally, you don’t have many mandatory lectures and classes during the week. However, there are quite a lot of independent work you have on your own. 

So, you have plenty of time to work part-time if you want during your studies. If you don’t want to work during academic months, I would suggest you to at least work during the summer. But, be careful that you don’t earn too much!  If you receive a (and who wouldn’t!?) study grant (a basic financial aid for students), you have certain earning limits every year, depending on the amount of study grant you will receive during the year. For example, if you study for 9 months and receive study grant from these 9 months, your yearly earning limit is €12,498 in 2020. 

Tip 5: Think twice before buying anything new – and be careful with subscription services

As a student, you don’t have extra money that could be wasted on stupid things you don’t even need. Still, many of us fall into the trap of random shopping too often. Whenever you think about something that you would like to buy, you should ask yourself whether you really need the item that you think you need. Don’t believe commercials because only you know what you really need. 

Also, borrowing is a good way to avoid spending money on items you might only need on occasion. For example, if you plan to go play tennis a couple of times for fun, rather than buying a racket you could ask around to see if your friends can lent you one.

Other good way to avoid buying stuff are libraries. On top of books many libraries also lent out summer sporting equipment. So do check them out! There also many cheap second-hand markets in Helsinki that sell fashionable, quality clothing for a very reasonable price. 

Subscription services like Netflix and Spotify are great services, but these kind of services can insidiously increase your expenses before you even notice. 

Joonas Saloranta covers Northern Europe investing, macroeconomics and more at the Financial Nordic blog.

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Work to Study, or Study to Work?

Photo: Student housing in Helsinki.

University students in Finland are demanding more money. In 2017, financial aid was cut to EUR250.28 per month. Today, students are demanding a EUR100 increase in financial aid from the new government that would bring their support to around EUR350 monthly.

Unfortunately for students a rise in financial aid seems doubtful. Earlier this month Interior Minister Maria Ohisalo (Green League) stated on Yle’s 8 minuuttia programme that a hike is unlikely, though that had been one of her party’s main campaign promises during the election earlier this year. The new government has agreed, however, to link the amount of aid to the cost of living. Also more affordable houses and living have been promised to students.

Keeping students happy in a country that faces an aging population may be important, but increasing financial aid would be difficult given an already optimistic government budget.

GoNorth! Outlook
Finnish university students will have to keep up the pressure for the
long-term (we mean years) to see their financial aid increased.
The current government is unlikely to agree to a direct increase in
support …sorry students…

Why might Finnish students turn down work?

This year, Finland’s student financial aid program hits the graceful age of 50. University students don’t pay for education in Finland and receive government financial aid to support themselves. The idea is that young people are enabled to focus on their studies and not have to worry about working at the same time. Therefore, they should be able to graduate faster and become tax payers, which is what Finland needs, especially given the demographic challenges mentioned above.

Here’s the catch: accepting financial aid substantially limits how much a student can earn by working. Yet few companies will hire a graduate with little work experience. Currently, if you study nine months out of the year, and you take out financial aid during those months, you can earn up to EUR11,973 annually.

Summertime blues

The income limit was set because the Finnish state didn’t want wealthy students who were able to independently support themselves also receiving financial aid.

It’s not exactly easy to survive in expensive Finland with only financial aid, especially if you want to enjoy your university years, which every sane person does. What’s tough is that even if students don’t get financial aid for the three summer months (unless they study full-time during the summer), the income they earn from a job during this time is calculated into the whole year’s earnings. A student who succeeds in getting a well-paying summer job and continues part-time work during study time can quite easily go over the earnings limit.

For example, if you make EUR6,000 between June-August, you’ll only be able to earn EUR5,973 the rest of the year. This would mean EUR664 per month. This limit is quite low especially if you, like many students do, work on weekends or nights and earn extra for unusual working hours. For example Sunday work pays double the usual salary.

Tax the students

A January 2019 study from the Labour Institute of Economic Research recommended that the earnings limit be increased to about EUR18,000 per year for students who study nine months out of the year. This would have a positive impact on students’ well-being and increase the government’s net income tax revenue by EUR5.9 million annually, the report found.

At present, the risks of earning too much are real for students. Finland is the only Nordic country that requires students who earn over the limit to pay back the financial aid they received that year in full. That’s right. Go over the limit. Pay it all back.

In comparison, in Finland’s Nordic neighbor Norway, students who earn more than they are allowed only have to pay a greater amount of tax. In Denmark, only the amount earned that’s over the limit for students receiving financial aid has to be paid back.

Finnish social service agency KELA says about one in ten Finnish students ends up exceeding the earnings limit. In fact, the latest statistics show that the number of students who earn too much while receiving financial aid has increased. In 2019, KELA requested 40,000 students to repay financial aid from 2017. This was an increase from 34,800 in 2018 (a payback request from support given in 2016).

Cuts and Loans

Student financial aid without housing support is currently EUR250.28 a month. It used to be EUR336.76* before the previous government (2015-2019) brought it to the cutting board in 2017. Chop.

That government, led by Juha Sipilä of Centre Party (Suomen Keskusta), increased the amount of affordable government backed loans offered to students instead. Now students can take out loans of up to EUR650 per month. On top of that a student can get an up to EUR400 per month housing allowance, depending on how high their rent is and if they live alone or not.

This lower financial aid was put to place in August 2017 and already now it has increased the amount of debt that students take on. According to the Bank of Finland students took out EUR15 million more in loans in January 2019 than they did in the same month a year ago. In total, the amount of loans given to students in January 2019 was EUR285 million. The median interest rate on these loans was 0.48%, according to Bank of Finland data. This is a very low interest rate and some students even use the loan or part of it to invest in different assets. As of August 2014, if a student takes out a loan, 40% of the amount borrowed above EUR2,500 can be ‘forgiven’ (up to EUR6,200) if they complete studies within the amount of time Kela estimates it should take them, becoming an educated, full-time tax payer on schedule.

*For students at university and college level. Lower level students were already receiving only EUR250.28 per month before August 2017.