Student finances: How to manage money at university
TOMORROW is A-level results day, but the hard work begins when students start to learn how to handle their own finances.
Those with financial support from parents and grandparents when they head to university stand the best chance of staying on top of their money, but even then it will not be easy.
Many families fail to realise the financial burden a university education puts on their own finances, as well as those of their children.
Tuition fees now cost a whopping £27,000 for a typical three-year course, although students in Wales and Scotland get more support.
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Residential fees, materials and living expenses on top mean that self-funding students in England are likely to graduate with average debts of £50,800, according to the Institute for Fiscal Studies.
NFU Mutual chartered financial planner Sean McCann said families who expect their offspring to borrow the full cost of their university course are in for a shock, as student maintenance loans for digs, food and other living costs are means tested: "Only students from the poorest households can borrow the full amount, while those from households earning more than £25,000 cannot."
Some families fail to realise the financial burden of giving each child the most basic financial support
Without help from the Bank of Mum and Dad, some youngsters could struggle to borrow enough to make it through university.
He said: "Some families fail to realise the financial burden of giving each child the most basic financial support until it is too late."
Parents and grandparents need to plan ahead while children are still young and take the US concept of a college fund a bit more seriously, McCann added.
Colin Haywood, wealth planning director at Sanlam UK, said families should start by saving in a Junior Isa: "You can currently save up to £4,128 a year, which your child can access when they turn 18."
Today's best Junior Cash Isa from Coventry Building Society pays 3.25 per cent and Haywood said: "Save the full annual amount at that rate for 10 years and you will have £49,427 free of tax."
You can use a Junior Isa to invest in stocks and shares to seek potentially greater returns, although with more risk due to market volatility. Grandparents can contribute too.
"They can gift up to £3,000 each year with the money instantly falling out of their estate for inheritance tax (IHT) purposes," Haywood said.
Student Finance England advice on repaying student loans
Grandparents could also set up a trust to gift money, but retain control over how it is spent: "This may reduce their IHT liability too, but it is quite complex and professional advice is essential."
Another option for the over-55s is to take their 25 per cent tax-free pension lump sum to help cover university costs. "Just make sure you still have enough money to live on in retirement," Haywood added.
Chris Atkinson, head of consumer distribution at Zurich Insurance, said applying for student finance is not easy and families can help: "There are lots of forms and documentation including bank account details, proof of income, ID and proof of address, so encourage children to keep on top of all deadlines."
You could also help them shop around for the right bank account. "There are competitive deals, for example, NatWest is currently offering a coach travel card for four years, while with Santander you can get a four-year 16-25 Railcard, but do not base your choice of account purely on the freebie," said Atkinson.
Now is also a good time to help your children plan incomings and outgoings, he added: "Creating a budget sheet and a calendar tracking when bills have to be paid will put your child on top of their finances."
Many students will take on part-time jobs to fund their studies and are liable to pay income tax if they earn more than £11,500 a year.
"Encourage them to notify HM Revenue & Customs to prevent them facing a tax shock further down the line," he said.
