Going to university is a very exciting time for students, as they start a new chapter of their life and meet new friends while studying their chosen subject. Many students will be moving to a new area and are usually moving out of their family home for the first time.
As well as having extra learning demands when students start university, taking responsibility for their own finances can also be an unfamiliar challenge. If students have never had to manage their own money before, they might not understand the long-term impact of getting into debt.
For many students, taking out a student loan is a necessity, but it is important that students have the financial knowledge to try and keep debt to a minimum, through careful budgeting and cost-saving techniques.
Before your child goes to university, you should have an in-depth conversation about money management and how debt affects future financial stability. Here are some tips about how to talk to students about money before they start university:
Find a student bank account
Opening a student bank account will help students to manage their finances, pay bills, and have the convenience of using a bank card. Banks often offer good incentives for students to choose them, so the first step of talking about money could be helping your child to decide which student account will be most suitable for them. You should also talk about overdrafts and how they work, as most banks will provide a large overdraft while the student is at university.
Practice budget calculations
Being able to budget effectively is very important so that students can ensure all bills are paid and can then see how much money is left for food and socialising after paying for all the essentials each month or term.
You can practice this using a spreadsheet, a notebook or even an online budget calculator, whichever one the student finds easiest to work with. This will give them the practice of doing the calculations and they can continue to work to their budget throughout university and beyond.
Talk about the impact of debt
For some students, receiving loans and being able to apply for credit when they turn 18 can be very exciting but also a big risk. Some students are tempted to spend their loan money or take out store cards to spend on items that they do not really need.
Having a conversation about how interest rates build up and how getting into debt can affect their chances of getting a mortgage in the future should help students to understand the impact of unnecessary spending.
Instead of approaching this conversation in a way where you are trying to dictate what they should spend money on, you could give an example of a financial regret that you have, or someone else you know that got into debt at university by buying unnecessary items and how it impacted their life after university.
Talking to students about money is not always easy, as they want to enjoy their independence and it is a natural part of growing up. Try to make sure that they know they can talk to you without being lectured about their finances, as this will encourage them to openly talk to you about money and get advice in the future.
For more information on Talk money week visit https://maps.org.uk/talk-money-week/