Watching your kids or grandkids go off to university brings many feelings:
- Pride: At how well they have done until this point.
- Nostalgia: Where did the time go? It only seems like yesterday they started nursery!
- Freedom: It’s time to turn that box room into a home gym at last!
- Utter terror: How will they survive in the big, wide world, without you to protect them?
…And many more besides. But, there is another emotion which should begin to manifest in the months remaining before they move into halls and embark on their next journey;
Complete confidence that they know how to handle their finances.
At this point, you’re either nodding eagerly, or stifling a giggle at the notion that your child won’t spend their entire student loan within the first week.
Either way, we urge you to read on to discover the top three bits of wisdom you can pass onto the next generation:
1. There’s more to budgeting than ‘in vs out’
Making a budget seems simple; and it can be, but it also needs to be realistic. It’s easy to write numbers on a piece of paper and claim that you’ve created a budget. But, as anyone who has done so knows, leaving no room for fun activities, or guessing at figures, without looking at what you really need to spend each month will render the whole process useless.
Instead, teach your children and grandchildren how to look at their expenses realistically and make sure that they are allocating some of their income to treats and socialising. Rather than assuming that leading a boring lifestyle is the only way to control their spending.
Deciding to do nothing at all is more likely to lead to a sudden outburst of spending which will cause more damage to their bank balance than making allowances for regularly blowing off steam would.
2. What happens at uni doesn’t stay there
Whilst university is full of opportunities to try new things and experiences, it is not the place to take risks with your finances. It is important that students understand that their actions will have consequences, which could last well into working life and could impact their ability to buy (or even rent) a home when they want to settle down.
Opportunities to make long-lasting mistakes arise frequently during student life. Two of the biggest examples of this include:
- Moving home: Most students will move into new accommodation every year. That means a change of address and a new set of utility providers to contact. It’s essential that all old providers are informed of the move, retained contracts such as mobile phone bills, are updated and new providers are informed.
Something as simple as failing to let an energy supplier know that they have moved, could result in your child being taken to court for unpaid bills and could even lead to CCJs against them, which will haunt them in later important moments, such as when they buy, or even rent, a home.
- Accessing credit: Student overdrafts and credit cards are easily accessible from most banks and building societies, and when used correctly, they can really help students to manage their finances whilst studying.
However, students can often be the targets of ‘payday loan’ companies which come with extremely high interest rates, making them hard to repay. They also remain on your child’s credit report for many years and mortgage lenders have been known to turn people down solely for having used them when younger.
3. In times of peace, prepare for war
Not literal war, we hope. What this means is that students should make the most of the income they have, by putting some away for times which might be less fruitful. Having an emergency fund is invaluable when an unforeseen situation presents itself. Of course, if family is available to help, let them know they are not alone, but the first port of call should always be their own preparation and financial buffer.
This may also be a good time to discuss what constitutes a financial ‘emergency’, otherwise the cost of repairing their car might fall on you, if the latest game console has had a midnight release event recently.
For more tips and pearls of wisdom to pass onto younger generations, get in touch with Ben on 0113 262 1242.