It might only seem like five minutes since you dropped them off at nursery for the first time, but this September, thousands of parents will be facing a much bigger journey; dropping their child off in another city to start their university career.
As A-level results start to roll in and university places are confirmed, you will no doubt be helping your child get everything ready to move into their new accommodation and make the most of the next opportunity in life.
You might have crockery, bedding, a toastie-maker and kettle ready to go, but have you taken the time to make sure your child is prepared to handle their finances during university life?
If not, now is the time to do so, as research from Which? has shown that 1 in 10 students have considered dropping out of their course due to financial strain.
Things to discuss
There are many factors affecting financial stability during student life, and it is important that your child understands how they interact with one another and can affect their livelihood in both the short and long term.
- The cost of living in different areas
This can be an important conversation to have if your child is still trying to decide between different universities. Of course, the cost of living should not be a bigger priority than the quality of education available, but it can be used as a deciding factor between similarly-performing universities.
Research from Totally Money has resulted in a comprehensive list of the top 50 most affordable university areas to live in. The 10 least expensive in terms of living costs are:
- University of Warwick
- University of East Anglia
- Swansea University
- University of Bath
- Keele University
- University of Birmingham
- University of Manchester
- Queens University, Belfast
- Nottingham Trent University
- University of Essex
Of course, the cost of living will depend on the things you child decides to spend their money on. Though the binge-drinking image is still largely pedalled in the media, it’s probably more important to look at the cost of renting and travelling (if necessary).
The day their first student loan instalment hits their bank account will be an exciting one. On top of the few thousand pounds which have just appeared in their account, they may have been granted a student overdraft, which will make their available balance much higher. It can be very tempting to go on a spending spree and enjoy the freedom of having new found ‘wealth’.
However, that money needs to support them until the next instalment, which is likely to be deposited in January. That means they need to make their money last for four months, which will include the Christmas and New Year break.
Talking to children about budgeting isn’t always easy, and there’s no guarantee that they will listen to your advice. But, to put them in the best position to succeed, you will need to cover:
- Paying bills: Though they may be included in the rent, there may be additional costs to consider, for example, if they want satellite television or high-speed internet.
- Rent: Some universities and student landlords take rent in instalments throughout the year to coincide with student loan payments. However, others will expect a monthly payment, which has to come out of a gradually dwindling balance. That means your child will need to make sure that they have enough available, or open a separate account to keep non-disposable cash in.
- Managing disposable income: Remind your child that once it’s gone, it’s gone. It is entirely up to them how they wish to spend any leftover money from their student loan, but if they blow it all on their first night out, they are in for some quiet weekends for the rest of the term!
Most student bank accounts include an overdraft, and student credit cards are also becoming more common among high street lenders. It’s not difficult to understand why these are attractive options for students, but it is important to make sure they understand the implications of using them and the consequences of failing to be sensible when doing so.
Having excess money to fall back on in an emergency is great. However, there is always the temptation to spend money just because it is available. What is important to remember is that money must be repaid and failing to do so can have some dire repercussions and will damage their credit score. Mishandling credit now and relying too heavily on a credit card or overdraft could mean that mortgage lenders are reluctant to accept a mortgage application in the future or will only offer high interest rates.
Learning to handle credit during their student years will help them to be more prepared to enter the world of full-time work and managing the family finances.
Going off to university is the first step toward adult life and we hope your child has a great (and financially sensible time). We know that it is likely to be an emotional time for you, as a parent, but we hope that by giving your child the most valuable gift; wisdom, you can feel a little bit more comfortable watching them take their first steps into the adult world.
To discuss any concerns you may have, or to involve your child in the financial advice process, please get in touch with us on 02380 633377.