WITH With many colleges returning over the next two weeks, it’s a worrying time for parents and grandparents as their teenagers leave the nest – perhaps this year more than any other.
A student’s budget is notoriously tight at the best of times. But we are currently experiencing one of the worst financial crises since the 1970s. Inflation remains at a budget of 9.9% (and that’s only down from 10.1% the previous month thanks to the prices of fuel – food and services are always on the rise).
This means that rising food prices will hit students hard. According to market research firm Kantar, the rise in supermarket prices in August added £571 to the average annual grocery bill1. And let’s not forget energy prices. Even with the energy cap coming into play, the choice between heating and eating will still weigh heavily on students’ minds.
Many parents and grandparents will no doubt feel the financial pinch themselves as the cost of living crisis tightens its grip as winter approaches. So what practical tips can help student budgets go further?
1. Carefully select a student bank account
Looking for a student bank account is a worthwhile exercise. Banks compete for student business, so accounts often come with perks, including cash incentives of up to £100, e-book subscriptions and free travel passes.
2. Encourage them to track their finances
Encourage your teen to interact with their banking apps and monthly statements. As an exercise, you can have them look at their monthly income and expenses.
Of course, the cost of living only adds further challenges to students. Ask them if there are any costs that can be reduced, such as canceling unnecessary subscriptions and taking a break on takeout.
If your teen finds themselves with extra money, there are apps that automatically turn into a savings account. It may not be a life-changing amount, but it’s worth emphasizing that saving regularly is a good habit to get into as they enter adulthood. The pennies add up, even if it takes time.
More and more students are looking for part-time work to help finance their studies. This is great for teaching them how to manage their monthly salary. They will also have a bit more disposable income, which will make college more enjoyable.
3. Debt is inevitable, but be careful…
Tell your teen to be smart about their debt — for many, it’s a natural part of the college experience, whether they’re getting a tuition loan, a bursary, or applying for a discovered.
Speaking of what…. Student bank accounts offer up to £3,000 in interest-free overdrafts, but it’s important to stress that an overdraft should only be used for emergency expenses, rather than day-to-day expenses.
The amount that will be offered depends on a credit check and, in some cases, the type of degree being studied.
In August, the Bank of England raised its key interest rate to 1.75% and it is expected to rise another 0.25 or 0.5 percentage points.2. So how does this affect students?
If students have debt in the form of a loan, for example, they have to pay back even more due to high interest rates. This means it is more expensive to borrow money and higher monthly payments will eat into their budget. That said, a student loan isn’t necessarily a debt you have to rush through. You can learn more about student loans here.
4. Lean on college help
If your child or grandchild seems to be having financial difficulties and you are unable to help yourself, there are other avenues to explore. Universities offer hardship funds to help with education costs and it is not necessary to repay them. And Student Services is another resource they can rely on in difficult times.
1 Cantar, 13.09.2022
2 Financial Times, 19.09.2022