Preparing your son or daughter for student life
If your son or daughter plans to go to university or college, you may be worried about how they’ll cope without you (or you, without them!). We can make this time a little less stressful for both of you with our handy tips on budgeting and borrowing.
- Student money
- Part-time work
- Bank accounts
- Mobile phones and broadband
- Insurance for personal belongings
- Food shopping
- Household bills
- Student discounts
- Before they borrow or take out credit
- Student discounts
- Getting help with debt
Depending on which part of the UK they are studying in and where you live, your son or daughter can use student loans to pay their tuition fees and/or some of their living costs. Yet this may not be enough to cover everything. Other funding such as grants and bursaries may be available. They do not have to repay grants or bursaries but eligibility for them will depend on your circumstances and theirs. You can visit your nation’s student funding agency for more information on grants, bursaries and loans:
- Student Finance England on the GOV.UK website
- Student Awards Agency For Scotland website
- Student Finance Wales website
- Student Finance NI website
Your contribution to their costs
Your income and circumstances will have been assessed to determine whether and how much you should contribute towards their living costs. Our Budget planner will help you work out where your money is going and where you can make potential savings.
Once you have prepared a budget you can see if your son or daughter may need to consider taking on part-time work to help bridge any gaps in their funding. Talk about whether they plan to work during term time or holidays. If they are planning to work dur ing term time then get them to aim for a reasonable balance between work and study. Also encourage them to look for work as soon as possible – there is likely to be lots of competition for part-time jobs! To help them understand the world of work and taxes point them towards our advice on jobs and tax.
Balance is key
A significant amount of research has consistently shown that limited part-time work (about 10 hours a week) actually has a positive impact on academic performance – the theory being it forces the student to manage time effectively. However excessive work (more than 20 hours) has a very negative impact on academic performance and learning. To help them manage their money and hopefully have less to worry about, show them our advice on budgeting for college or university.
Many high-street banks will try to appeal to students with offers of free overdrafts as well as ‘freebies’. Encourage your son or daughter to research different types of student bank accounts.
Comparison websites are a good starting point for anyone trying to find a savings account tailored to their needs.
We recommend the following websites for comparing savings accounts:
- Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
- It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
- Find out more in our guide to comparison sites
For more information direct them to our advice on student accounts.
Mobile phones and broadband
You’ll both want to keep in touch without running up a massive bill at either end. Check out both your current tariffs and shop around for better contracts which include the things you and they really need. You should emphasise to your son or daughter that any contract they sign in their name is their responsibility! To help them manage their phone bill, show them our advice on mobiles.
Insurance for personal belongings
Your son or daughter will need to insure their belongings. You may be able to extend the cover of your home contents policy to cover their belongings. If you and they decide to get their own, encourage them to shop around but make sure they get enough cover for any expensive items such as laptops, tablets, bikes, mobile phones or musical instruments. Student Unions often have information about insurance companies that have products to suit students’ needs. And some student halls of residence include contents insurance in their costs – it always pays for your son or daughter to check.
If they’re planning to take a car to university or college, they need to be properly covered with car insurance. Don’t put the policy in your name with your son or daughter as a named driver if the car is mostly driven by them and kept at their address. It may be tempting to try to reduce the costs of insurance by ‘fronting’ the policy, but beware this is illegal and could invalidate the policy. The insurance company can refuse to pay out on the claim, cancel the policy, and even prosecute the policyholder or driver for fraud.
It will probably be the first time they will be shopping and cooking for themselves and they’ll be doing it on a tight budget. Anecdotal evidence shows that many students will naturally shop at the same places you do – and this may not be the best use of their budget. If you have time, compare the prices of some basic products at different supermarkets and at the local market. Tip them off that many supermarkets reduce the prices on perishable foods late in the afternoon.
Finally, once they’re settled, you could suggest they learn one or two easy and cheap dishes that they can prepare themselves and impress their new housemates with.
If your son or daughter is moving into halls of residence they shouldn’t have too many bills to pay, as these will mostly be included in their rent. However, if they are sharing a house with other students, they’ll need to get to grips with their own bills for utilities. They’ll need a TV licence even in halls of residence if they have a TV in their room. They’ll need one whether they’re watching programmes on a TV set or live on another device. They can get a refund from TV Licensing if they have at least three whole months left on their licence when they move out. For more advice you can show them our tips on paying bills.
Full-time students in England, Scotland and Wales are exempt from Council Tax so if your son or daughter is living in accommodation where everyone is a full-time student they won’t need to pay. They will need an official letter from their university or college giving details about them and their course. For more on students and Council Tax see the GOV.UK website.
Encourage your son or daughter to research things like discounts that they might be entitled to. For example, students may qualify for discounts on:
- Rail travel – a 16-25 Railcard offers valuable savings. They should also check with their university, college or local bus company as many areas offer special travel cards for students and some universities or colleges may offer free student bus services, and
- Shopping – with the National Union of Students (NUS) card. It provides discounts at lots of places, including high-street stores for books, clothes, food and entertainment.
They’ll probably need to get some ID photos taken in advance so bear this in mind.
Before they borrow or take out credit
Before borrowing any money your son or daughter will need to understand interest rates and charges so that they can compare different credit and loan offers and choose the best deal. All lenders have to tell you what their APR (Annual Percentage Rate of charge) is.
The APR will vary significantly between different types of borrowing and from lender to lender, but generally the higher the APR the more expensive it is to borrow money. With your son or daughter, take a look at the options below for a snapshot of the types of borrowing and credit options available and how interest rates vary.
Understanding a little bit about credit rating is also important. Most lenders will credit score applicants to help them decide whether to lend them money, and for some products (such as credit cards) what their credit limit and interest rate will be. Building and keeping a good credit report can help your son or daughter get access to better and cheaper borrowing now and after they graduate. It’s a good idea for them to review their report at least once a year. That way they can put right any mistakes or alert the credit reference agency if someone else has taken out credit in their name.
The borrowing and credit options
As a new student, your son or daughter will probably have lots of different borrowing options open to them. If after making a budget, your son or daughter needs to borrow to pay for living costs as a student, then they should consider the cheapest options first. Some quick-and-easy options, such as payday loans, cost much more to repay. Resisting or saying no to certain credit options can prevent your son or daughter getting into unmanageable debt.
- Student loans. Each student can apply for up to two loans each academic year: one for tuition fees (if they are charged in that nation) and one for living costs. Hardly any other borrowing will be as cheap and offer as long a repayment term as a government-backed student loan. The interest charged on student loans is currently linked to the rate of inflation. Although this is a very cheap form of borrowing, it’s not ‘free money’ as some students believe – the loans will need to be repaid once your son or daughter is earning a minimum amount, currently £21,000 in England and Wales for loans taken out from September 2012 (£16,910 in Northern Ireland and Scotland).
- Overdraft on their student current account. High-street banks are often keen to attract student customers and many will offer interest-free overdrafts as part of the student current-account package. Encourage them to shop around when choosing their current account and to remember that an overdraft will not remain interest free forever once they’ve graduated.
- Credit cards. These can be a cost-efficient form of short-term borrowing as there are some student credit cards that offer 0% deals on balance transfers and purchases. However, most credit card users are likely to incur a charge on transfers and, once the interest-free period ends, they will start being charged interest. With interest rates on credit cards hovering over 20% APR, the charges can soon build up. It is also important that your son or daughter understands the need to keep up with credit card repayments. Missing payments can be costly, the fees are high and it can also affect their credit score.
- Store cards. These are like credit cards but you can usually only use them in that store or group of stores. They are often offered at the till point in shops, sometimes promising a discount off the cost of the goods. Students may be tempted as they put together their new wardrobe, but store cards tend to charge higher rates of interest than most other loans. Any discount received when the card is taken out will be quickly offset by interest charges if the balance isn’t quickly cleared. It’s often better to resist temptation and say no!
- Payday loans. These are often advertised to students as a good way of getting them through to the end of term, but beware, they may prove to be a very expensive choice. Our Quick cash finder can help your son or daughter make savings in their budget from month to month.
- Home credit or doorstep lenders. These are salespeople offering loans by knocking on your door, and they often operate in areas where students live. They can be a very expensive way to borrow money. As with payday loans, encourage your son or daughter to talk to you or to their institution’s student money adviser before using this type of lending to see if they can fix their budget.
- Loan sharks. This type of money lender operates illegally, lending money without a licence. They are known to target vulnerable groups, including students, but should be avoided because their rates will be very high and they may use violence or intimidation to collect debts. Your son or daughter should be aware of the risks involved with this form of borrowing. They should report any loan sharks that approach them – see the GOV.UK website.
Getting help with debt
Even though debt is a fact of life for many students it can still cause worry and stress, particularly if they feel it is becoming unmanageable. Let your son or daughter know that if they begin to feel their debt is becoming a problem they can get free help.
Most universities and colleges will have a Student Money Adviser who can help. They will be able to tell students about any funds that might be available such as a hardship loan or fund. They can also help them talk to their creditors and create a budget. Alternatively your son or daughter can contact a free debt advice agency who will be able to help them.
Most of all, tell them not to ignore problems and not to suffer in silence!