The stress of A-levels is over, and a long summer stretches ahead for many teenagers before they leave for university. It’s a great time to prepare your child for the increased independence of student life – and to ensure they pick up healthy financial habits early on.
The first thing to do is to sit down with your child and work out a realistic budget. The average student apparently spends £770 a month on living costs, according to money advice site Save the Student. Most of that (£406) goes on rent, with food (£108) and socialising (£64) the next biggest costs, followed by travel (£47) and bills (£37). Take this budget as an example and go through it with your child. How will they cover the £770 a month? Will they need to get a part-time job, cut back on certain areas, or will you help them out? On average, parents give their student children £138.50 a month, according to the National Student Money Survey.
However, if you’re not in a position to do this, or you’d rather your child support themselves, they could take out a student loan to help with their living costs. As well as a tuition fee loan of up to £9,250 a year, students can also apply for a maintenance loan of up to £8,700, as long as they are living away from home (this rises to as much as £11,354 for those studying in London). If your child is under 25 and depends on you financially, you’ll have to provide your household income as part of the application for a full loan. Divided over eight months of term time, this loan payment should more than cover their living costs.
Just make sure your child understands that those loans will be repaid out of their future earnings, and that interest is charged at an inflation-adjusted rate from the moment they borrow the money. That said, the loan only becomes repayable when and if you earn more than £25,000 a year. At that point, you’ll repay 9% of your income over that level, and if your income drops below £25,000 a year at any point, the repayments stop.
Also, after 30 years, the loan is cancelled, regardless of how much has been repaid. So as Martin Lewis points out on MoneySavingExpert, this means that fear of being unable to repay student debt should not deter your child from going to university. That said, it’s conceivable that, as with pensions, the government could change the system in the future, perhaps even retrospectively. So read the small print and keep an eye out for any rule changes.
The best student bank accounts
Although student bank accounts often come with lots of exciting freebies, don’t let your offspring be distracted by these to the detriment of their finances.
For many students, an interest-free overdraft is key. Even if they don’t need the money, they could take it all out and put it in a savings account to earn a bit of interest. Nationwide, HSBC and Barclays offer the biggest 0% overdrafts, at up to £3,000 over three years.
If your child is likely to have some money sitting in their current account each month, then look at which accounts pay the best in-credit interest rates. For example, Santander pays up to 3%, Nationwide 1% and TSB 5% on up to £500. Our personal favourite is the Santander account. This offers a 0% overdraft of up to £2,000 (gradually increasing each year), up to 3% interest, and your child will get a free four-year railcard.
The next best option is Nationwide, with a 0% overdraft of up to £3,000, starting with £1,000 in the first year and rising to £3,000 in year three. If your child is accepted for the account, they are guaranteed the full overdraft, whereas all other banks may offer a lower overdraft based on credit ratings.
Pocket money… debentures could make an ace investment
• Tennis fans with “cash to spare” should consider investing in Wimbledon debenture tickets, says Ife Oguntokun in The Sunday Telegraph. These offer both a chance to get close to the action and a potentially lucrative income stream.
Debentures are effectively five-year season tickets. Opt for a Centre Court ticket, and you are guaranteed a great seat for every day of the tournament, while a No. 1 Court option guarantees you a seat for the first ten days. The tickets aren’t cheap – in 2014 when Centre Court debenture tickets were last sold they cost £50,000, while a No. 1 Court debenture for 2017-2021 cost £31,000. However, they are regularly sold on the secondary market; three went for more than £123,000 each in April this year, despite only having two years left until expiry.
If you hold a debenture, then you can choose to sell your seats on individual days, for an entire year, or sell the whole thing. In fact, just selling your seat for one day can be rewarding – debenture holders sold a pair for this year’s men’s final for £8,000. Centre Court debentures are due to go on sale next spring – but be warned they could cost a lot more than £50,000, as they almost doubled between the last cycle and the current one.
• If you plan to holiday in the UK this summer should you bother with travel insurance? Most assume there’s no need, because there is no risk of unexpected medical bills, says Laura Whateley in The Times, but it may still be worth considering in case of other last-minute problems. “If you have to cancel your UK break… you should be able to claim the costs back, which is more than worth it if you’ve booked a pricey cottage for a fortnight.”If you have annual cover, check that it insures trips that don’t involve overseas travel – some don’t.
• After decades of striking fear into homeowners’ hearts, Japanese knotweed has been declared no more dangerous than buddleia, says Victoria Allen in the Daily Mail. Even though the presence of the plant can half the value of a home, it rarely causes structural damage, say researchers at the University of Leeds. In fact, of 122 properties that had knotweed nearby, just seven had suffered structural damage.