Money at university
Anna Gosling
One of the most important stages in a child’s life is when they start university — there are few bigger transitions in life they will face than this.
When I started university, I was delighted to discover that my allowance would be increased to £100 a week — I used to get £110 as a monthly allowance. But of course that now had to cover everything and until I got into it I didn’t realise how much the costs of living add up!
First of all, it is important to establish how you are going to provide them with this money.
The first step is to decide how much financial support you’ll provide and whether you will be asking your child to take out a maintenance loan in addition to the £9000 a year loan for tuition fees. A maintenance loan provides purely for your child’s living costs and can range from £4500 to around £9000 per year depending on how much you earn.
This then gets divided into three lump sums which are released each term. Banks generally permit an overdraft of up to £1500 which has to be paid back within three years after they finish university.
“I knew many people who went £1500 into their overdraft within the first month of university, which I imagine was extremely stressful.”
The second step is to decide how frequently to pay your child the money. If you decide to take out the maintenance loan, you can have it paid directly into your child’s bank account, meaning they are responsible for making the lump sum last throughout the 3-month term.
One of the benefits of this method is that it gives your child a greater sense of freedom and responsibility, because essentially you have rescinded all control of their finances.
However, one of the downsides which I saw some of my friends struggle with is that it is hard to make the lump sum last the whole term; it is very tempting to overspend because you are presented with such a huge amount at the start. I knew many people who went £1500 into their overdraft within the first month of university, which I imagine was extremely stressful.
One thing I also noticed with people who were in charge of their own maintenance loan was that they tended to spend outside of their means when they first received the sum and were then forced to scrimp and save in the second half of the term, living on the breadline and desperately waiting until they received their next instalment.
However, on the other hand I do think that this does prepare you for budgeting in the real world in a way that receiving money weekly doesn’t.
An alternative method, is having you child take out the maintenance loan, but they pay it over to you, allowing you to drip-feed it as a monthly or weekly allowance. This means that they still receive the same amount but are less likely to run into the problems highlighted above.
I have friends who received this divided into £100 weekly and some who received it as £400 monthly. This has the benefit of you still having some control over their spending habits, but still leaves the responsibility of paying back the maintenance loan with them once they finish university.
Alternatively, you can decide not to take out the maintenance loan at all and just give your child an allowance. This means that your child won’t have to pay back a maintenance loan once they finish university. Whether you consider this a good thing or not depends on your philosophy.
Some may feel that this method is too overindulgent and you may want your child to face the responsibility of paying back their maintenance loan as well as their fees. I personally think that if you can afford it, it is a good way to alleviate the financial burden that your child will face coming out of university.
Regardless of whether or not you choose to pay for their maintenance, they will still have the responsibility of paying back their tuition. My parents chose not to take out a maintenance loan, and I don’t feel it’s left me feeling spoiled or overindulged, but rather enables a small sigh of relief that I have one less thing to worry about coming out of university!
“Getting a part-time job at university can not only alleviate any financial struggles, but also gives a sense of responsibility.”
Whether your child is taking out a maintenance loan or you are funding the cost directly, I would recommend giving the money weekly, at least at the outset, as I personally found that this meant I would never go more than a few days having less than £20 in my account.
It also surprisingly allowed me to save, so if there was a more expensive event coming up, a meal out or some new clothes I wanted, I could afford to treat myself! If you’re concerned this is too much like spoon-feeding them, then as your son or daughter develops good spending habits you can always move the allowance from weekly to monthly to prepare them for life in the real world.
Another factor to consider is whether your child will get a part-time job while at university. For some this isn’t an option, but rather a necessity. But for children of successful professionals it will be a matter of choice as to whether parents require it.
Getting a part-time job at university can not only alleviate any financial struggles, but also gives a sense of responsibility and is a good way for your child to bolster their CV.
Being in a work environment (whatever the field) will provide good work experience and prepare them for their future career. It is important to remember that your child will only consider getting a part-time job if they are not being overindulged when it comes to money. Therefore, if they call you up asking for money because they have run out, it is important that you remind them that their student loan or allowance is their responsibility and that they need to manage this effectively.
If they are struggling sticking to their budget, remind them that getting a part-time job is a good way to supplement this.
Overall it seems reasonable to give your children enough support that they can survive without getting a job, but not too much so that if they want more luxuries they will have to work.
Natwest do a great survey of living costs in different university cities that can help you figure out where to set the level. I didn’t get a job at first, but that was mainly because at the beginning of term I struggled to find the time — somehow the first few months at university seem to be the busiest!
I was also quite good at managing my money and had some saved up which I could dip into if I was struggling. However, at the beginning of March 2020 I did begin looking for a part time job before COVID-19 brought the term to an abrupt close!
“Even though the loans are only paid back once you earn above a threshold, the sheer size of the debt can be unsettling.”
One concern that many parents have about sending their children off to university is that they won’t be able to manage their spending effectively, and that their children will ring them during the first term broke and in debt.
However, I can assure that this is almost never the case. Most people quickly adapt to the independence university life brings and soon learn to keep costs of socialising, food shopping and general living costs within their budget. I am most certainly not a golden example — I am not always uber-responsible when it comes to spending and I often found myself spending far more on going out than I had planned, meaning I had to compromise when it came to food. But that spontaneity is one of the best parts about university, and you wouldn’t be living the student lifestyle if you didn’t have to scrimp and save after a particularly heavy night!
Overall, I think that money and spending habits at university take a bit of time to get right, but it’s all a learning experience — and the best way to learn is by making some mistakes on the way.
However, I think it helped me having my allowance split into weekly amounts, because it meant that these mistakes only resulted in me having to scrimp on food for a few days rather than getting sucked into a mounting overdraft! Once your son or daughter has established good habits, you can always move the allowance to monthly to prepare more for the real world.
If you can afford it, I think that a balanced approach to supporting your child at university will be right in many cases. They should bear some accountability for their education, so making them pay tuition fees through the loan system is fair enough. But if you can, supporting them in their living costs alleviates their financial burden coming out of university.
Even though the loans are only paid back once you earn above a threshold, the sheer size of the debt can be unsettling. Requiring your children to work through university might be character-building but equally could be stressful given the pressure to get the best possible academic results. Funding a basic lifestyle but requiring them to work if they want better than that or to fund a holiday seems a fair approach.
However, as I said before, it all depends on your philosophy. I know people who took maintenance loans and others who didn’t. Some were paid their support termly, others monthly or weekly. Some have more money, others less. Some work part-time, others don’t.
The key thing to remember is that none of these ended in disaster — if you have brought your children up with a relatively adequate understanding of money and responsibility, they will be absolutely fine and university will be the exciting experience that it should be.
There comes a time in every child’s life where parents have to accept that they have taught them all they can and they are ready to be sent out into the world and experience it all for themselves.
Start a conversation
If you like what you see, do get in touch to ask a question, share some thoughts or fix a time to chat. I’ll do what I can to help.