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Help your teen budget at university

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Leaving home for the first time is both an exciting and daunting experience.  Many teens who fly the nest at just 18 years old are going to University or College, and not into full time work.  Money is tight, and learning how to budget effectively is essential to prevent debts mounting. Some teens are more cash-savvy than others, but all will benefit from a little parental guidance along the way.  Here’s how to help your teen budget at university

Debt is a part of student life

Gone are the days when the government conveniently dropped a free grant cheque into your account at the beginning of each term.  The cost of a higher education for most now sits squarely on the shoulders of the student.  The logic behind this it that it is the student who will ultimately benefit from their enhanced education by being able to secure a higher paid job, which will allow them to repay the debt later.

Whatever the politics of this reality you need to help your teen understand the facts: most of the money they spend whilst at University or College will be BORROWED and will have to be PAID BACK eventually.  This includes student loans and overdrafts.  With this in mind, it makes sense to keep spending to a minimum.

Before they go

If possible, try to engage your teen in money issues ahead of their departure.  Helping your teen to gain an awareness of costs in the real world will assist them in understanding just how quickly money disappears once you start having bills to pay.

Showing them how you manage your own finances can be a good starting point.  Then challenge them to use the principles of income vs outgoings to create a budget of their own.  This will get them thinking about all the elements they have to consider, and you can be on hand to fill in any gaps.  Paying the water bill is unlikely to be at the top of their list, for example, and may be forgotten altogether.

Assess income

Student income can derive from many sources, so it is important to consider all of the following when working with your teen to define their budget:

  • Student loans
  • Grants – a few lucky souls may still have access to these in some form
  • Earnings – your teen may decide to take a part-time job whilst studying, and income from holiday jobs can be valuable too
  • Savings
  • Gifts
  • Parental contribution – if your own budget permits

Most banks offer a student overdraft as standard on student accounts.  Although it is (initially) interest-free, it is best to leave this as a buffer rather than considering it to be available cash.  Even the most financially aware students deviate from their budget from time to time, and this overdraft facility will be needed when that happens.

Once you have your teen’s annual income sorted they may be feeling quite flush.  Now you need to bring them back down to earth and help them to understand their outgoings.

Be clear on outgoings

Costs incurred by your student teen will vary depending on where they live.uni budgeting  Many first years live in Halls of Residence, where they pay a fixed fee that includes certain bills, and sometimes meals too.  Others will reside in rented accommodation off-campus.  Some landlords offer deals where bills are included, but most will insist that their tenants take responsibility for paying utilities and taxes as required in addition to their rent.

Once you have ascertained where you teen will be living, encourage them to create a list of all their outgoings, as follows:

Essential weekly outgoings should include:

  • Rent – average £80 per week
  • Bills – if applicable, average £18 per week
  • Food – allow £30 per week

Their course will require some expenditure too, including:

  • Books
  • Printing
  • Stationery
  • Trips
  • Other materials

Everything else your teen will spend money on is effectively a luxury.  The amount they budget for these discretionary items will vary depending on their preferences, but you can help prompt them by suggesting they consider the following possibilities:

  • Going out – including taxis and drinks
  • Clothes
  • Travel – to and from campus and home
  • Mobile telephone
  • Soft drinks
  • CDs/Music/DVDs
  • Toiletries
  • Internet connection

With your list complete, show your teen how to compare their income with their outgoings.  It can be useful to break this down into a weekly calculation.  Most courses have an annual term time of 30 weeks, so this is a good starting point.  Help your teen to allocate amounts they can spend on non-essential items that will keep them within their weekly budget.  Doing a dummy comparison to show them what will happen if they do not stick to these amounts can be quite illuminating.

You and your teen will also need to consider how they will survive out of term time.  If all holiday and part-time earnings are taken up in paying for their time away, they will need to return home for the holidays, and will be reliant on the bank of Mum and Dad.  If this is not an option, then the income vs outgoings comparison will need to be based on a full 52 week year.

Other useful tips

Be aware that students are exempt from paying certain standard public charges.  The rules on this do change from time to time, so it’s important to do your homework.  Costs where exemption may be possible include:

  • Community Charge
  • TV Licence

If your teen is going to be sharing a rented house, then gently suggest that a communal kitty is established into which everyone pays regularly to cover all shared bills, such as the electricity, water and telephone line or internet connection.

There are many deals available to students.  Discounts are widely available on many things when using an NUS (National Union of Students) card.  Vouchers and 2 for 1 deals are also widely available if you shop around, and will increase your teen’s spending power.

Showing your teen how to keep an eye on costs is as important as setting a budget.  Help them to keep track of their receipts and bank statements as a way of monitoring what they are spending.

Above all, encourage your teen to be responsible with their money, even if their friends are not.  Credit cards and shop cards are tempting, but anything you buy on credit has to be paid back eventually.  Make sure your teen understands this crucial point.

 

 

 

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About Cally Worden

About Cally Worden

Seasoned freelance writer Cally Worden lives with her family and dog in a quiet corner of rural France. A love of the outdoors, and a fascination with her children's ability to view life with fresh eyes provide the inspiration for much of her work. Cally writes regularly for various websites and UK print publications on subjects as diverse as parenting, travel, lifestyle, and business, and anything that makes her smile.

Website: Cally Worden

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