Planning your child’s student finances | Personal Finance | Finance


Personal Finance

Many freshers will be living away from home for the first time. (Image: GETTY)

Debt is an inevitability of student life, with the average graduate expected to owe £50,000 in loans and other borrowings, but the more families can do to limit the damage, the better.

LOW MAINTENANCE

Many freshers will be living away from home for the first time, with only their student loan to help them navigate a new world of bills and expenses.

This year’s students are eligible to receive up to £8,700 in a maintenance loan per annum and up to £11,354 for those studying in the capital.

This is split across the three terms, but still means a sizeable sum being deposited into an 18-year-old’s bank account.

Liz Alley, a financial planning specialist at Brewin Dolphin, said families need to talk to younger members about this money: “An open and honest conversation will make it easier for your child to come to you for advice later and be honest about their spending.”

She said they may be unaware of certain costs, such as heating bills, broadband, optician costs and so on: “Maybe divide the term into weeks so they are clear on what they have to spend.”

Do not be too hard on them.

“They will have to make a few mistakes to learn how to deal with money for themselves,” she said.

Woman saving

If your children are still several years away from university it pays to start saving now. (Image: GETTY)

SAVING UP

If your children or grandchildren are still several years away from university it pays to start saving now.

Alley added: “if a family invested £100 per month over 15 years they could be sitting on £24,609 by the time their child receives their A-level results in 2033, assuming 4 per cent growth a year after fees.”

Grandparents are increasingly willing to help. she said: “The UK’s over 65s are sitting on £1.3 trillion of estimated housing wealth and many have cash savings too. They could enjoy making a living legacy, and also reduce any inheritance tax liability at the same time.”

CALM DOWN

Students must be prepared for surprise costs on top of tuition fees, rent, bills, food and going out, with research from Which? showing an average spend on books of around £120 per term and £150 on technical materials and eld trips. its online student Budget Calculator can help on University.which.co.uk.

Vivi Friedgut, founder of financial education service Blackbullion, said parents should warn children not to get too excited in the first week, partying hard and signing up to every club and society going: “You can always join later and spread the cost.”

Young people must understand how easy it is to fritter money via their mobile.

She added: “Easy-to-order tech platforms, such as Uber and Deliveroo, will chew through your money really quickly. Learn to cook for yourself, and walk when you can or use public transport when it is safe to do so.”

Just because something is cheap, does not make it a good buy.

“Student railcards are only worth it if you regularly take the train while a half-price pizza is only a deal if you were planning to eat pizza in the first place,” Friedgut added.

Student in the library

A key priority should be setting up a student bank account. (Image: GETTY)

BANK ON IT

A key priority should be setting up a student bank account.

Many banks tempt students with generous freebies, for example, HBC offers an £80 Amazon gift voucher and one year’s access to Amazon Prime worth £39, while santander offers a four-year student Railcard worth more than £70.

However, many students will be focused on getting the largest interest-free overdraft, with most banks offering £1,000 or £1,500 in the first year, and rising in future years.

ATM

Halifax, Lloyds and TSB set lower maximum overdraft levels of £1,500 in years two and three. (Image: GETTY)

MoneyComms.co.uk personal finance expert Andrew Hagger said not everybody gets the advertised maximum overdraft, it depends on your credit rating: “However, if accepted, Barclays, HSBC and Nationwide are the most generous, offering up to £2,000 in year two and £3,000 in year three.”

Halifax, Lloyds and TSB set lower maximum overdraft levels of £1,500 in years two and three.

Hagger added: “Whichever you choose, just remember this is not free money but a loan and must be paid back at some point.”

Hannah Maundrell, Editor-in-Chief of Money.co.uk, said overdrafts should carry a health warning: “stick to your limit like glue, as you will pay interest and penalties for going overdrawn.”

Woman looking at clothes

Student years are great fun, but where money is concerned they also involve a lot of hard work. (Image: GETTY)

DISCOUNTS

There are still plenty of student discounts, for example, the NUS Extra card costs from £12 and offers money off on cinema, eating out, fashion and technology.

MyUnidays.com, saveThestudent.org, and studentMoneysaver.co.uk are also worth checking out.

Forget tired stereotypes of the lazy, party-hard student, today’s budget- conscious generation are working to raise some extra cash, spending on average 15.3 hours working part-time, according to NatWest.

Student years are great fun, but where money is concerned they also involve a lot of hard work.



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