Helping your child make a budget for university

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Helping your child make a budget for university

For a young adult who hasn’t lived away from home before, the first couple of terms at university can be a massive learning curve. Suddenly being responsible for their own finances, learning what their true living costs are and finding some spare cash to party too can be a real test, and some do better than others. For most, budgeting like this is probably a challenge to some extent and some will even have to make the dreaded phone call home to ask for help from mum or dad.

It can be a good thing to get dropped in at the deep end and learn from mistakes. But once this lesson has been learned you might feel like it’d be good to give them a bit of structure to keep their finances under better control in the future.

A good way to do this without being too intrusive is to help them come up with a budgeting system. This way you can give them the helping hand they need to make a solid plan, but they retain their independence because they are responsible for managing and sticking to the budget.

The easiest way to structure a budget is by using a simple Excel document or even a table in Word. First get your child to work out and write down what their income is each term. This might include a maintenance loan, wages from part-time work if they have a job and any financial support that you give them.

Then they should make a column listing all their essential expenses, including regular direct debits for rent, bills and insurance and any other outgoings they need account for such as books for their courses or the cost of traveling home during the holidays. Once this list is complete they can take these costs away from their total termly income so they understand exactly how much money they have to spare. It’s important to also budget for food and unexpected expenses too. So whether they’re buying their food in the local kebab house or Lidl, it’s important to know what’s being spent.

With that worked out they can see a realistic idea of their disposable income (if there is any!). They should then break this down into a weekly budget for socialising and any other activities they might need to pay for. Although this is essentially an exercise in discipline, socialising is an important part of the university experience so you should encourage them to budget in enough money for sports, clubs and going out with friends.

It can be really good for budget management to write down everything you spend so you can spot areas where you could be saving or planning your spending better. How about suggesting that they do this for the first week or two of the new term just to get an idea of their current spending habits?

In preparation for a solid financial future you could consider helping them to apply for a credit card. They don’t have to (and probably shouldn’t!) actually use the card, but having one means they can start building up a good credit score. You can compare credit cards at Compare the Market, and going through the selection and application process will be a good learning experience for them too.

The final point to raise is that just because they have some disposable income, it doesn’t mean they have to spend it all! It’s important to remember that a maintenance loan is just that – and the more they save the less they have to pay back. There is nothing wrong with students making some mistakes with their finances along the way, as long as it helps them to become a more mature and capable adult in the long run – so give them some support and they will graduate a few years later with some important life lessons as well as a stellar degree.

 

 

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