Getting your financial planning ready for university
The A-level results came out on August 16th and thousands of teenagers up and down the country are now looking forward to starting university. Their parents, however, might be gloomily looking at their bank accounts and taking a rather different view.
With fees of up to £9,000 and accommodation costs of say, £5,000 per year, a student starting at university in September 2012 is going to graduate with a debt approaching £50,000. Many parents understandably want to help their children avoid this. However, evidence from the USA – where student loans have long existed – suggest that as the economy wobbles, many families are facing an excessive strain as they try and minimise the amount of debt that will now come with a degree.
Fortunately, there are some simple financial planning steps that you can take to guarantee that the good news of the A-level results isn’t swiftly followed by depressing financial news.
Typically, a child starting at university will mean two demands for money – immediate, and longer term.
In the short term there’ll be things you need to buy your son or daughter before they leave home – what teenager doesn’t need a new laptop? However, the university may also ask for money by way of a deposit against accommodation costs or – depending on where your child is going – a college bill for food.
If these costs can’t be met from income then they are ideally met by long term saving. Putting away just a small amount each month when your child starts secondary school should mean that there is a reasonable nest-egg ready for when they start university.
A regular contribution to your child’s ongoing university costs over a three or four year course requires more serious planning – and again, the US provides a salutary lesson. In the past, many families paid for their children’s college costs by using the equity in their homes. Unfortunately, the economic slowdown and subsequent fall in house prices has now left many families who did this without any equity in their properties.
Doubtless some people in the UK will fall into the same trap – but there’s no need to, as some basic financial planning should enable you to help your son or daughter through university, without breaking the family budget.
Long term savings are the key, and we’ll be happy to advise you on the most cost effective way of doing this. The same principles will apply to university costs as to any long term financial planning goals: make sensible plans and review them regularly – and make sure your savings are invested as tax-efficiently as possible.
We’ve worked with many families to help them do this: if you’d like to speak to us, simply pick up the phone or drop us an e-mail.
One last point: fortunately, it’s not all down to the parents! Here are three financial planning steps your children can take before they bid you a tearful farewell and plunge into Freshers’ Week:
- Sort out the best student bank account – while your son or daughter may have had a bank account for some years, it may not be the best one now they’re going to university. There’s keen competition between the banks and some shopping around on the internet may well pay dividends.
- Learn how to handle money and do some basic budgeting. Stories of students blowing their loan or grant in the first week of term and living on chips for nine weeks are legion. Make sure your child isn’t one of them.
- And the third recommendation? Work. Student holidays are long and money earned in the summer is money that doesn’t have to be borrowed – or provided by parents.
Your available for the odd question, consistent, friendly and professional. You want to understand what we want – even if we do not always know it ourselves!Mr H - Solihull