Here’s a memory that, as a Financial Planner, I probably shouldn’t share. Jumping out of a cab in Liverpool in the late 1980s just a week or two before the end of term, I dashed to the nearest hole in the wall to get some cash for my night out and – whilst the machine thought about it and bade me “Please wait” – I crossed my fingers behind my back in the hope that the friendly cashpoint would oblige.
In all likelihood I was asking for a fiver (those were the days). Without a doubt my polite request was declined. Gutted. No night out for me.
No idea how much money I had
What I remember most was the caustic ribbing I got from my friends for the crossed fingers and accompanying “please, please, please”. But also, the realisation that I had no idea how much (or little) money was in my account. Or – and this is more likely – how much or little of my overdraft was available.
An experience shaped by the cash machine
Reflecting now, I wonder how big a part the cash machine played in this little scenario. Up until I was 18 I had dealt mostly in postal orders for birthdays and cash wages for weekend or summer jobs. Both of which gave me full transparency of what I had. It was a fairly new experience to have a bank account and a card that allowed me to take money out without having to keep a note of the balance – a challenge that I clearly didn’t rise to. And it’s fair to say that being declined the cash was enough of an ‘experience’ to drive me to keep track of every last penny well into adulthood. But I had to go there in the first place to learn that lesson.
Tech – no excuse for poor budgeting
As Daughter Number One prepares to enter her second year at uni I see a very different world. The technology available to our young adults leaves them no excuse for poor budgeting – on the surface at least. But before I get accused of sanctimonious mum-judging, I would also note that the opportunities for messing up are arguably greater – and potentially have deeper and longer-lasting consequences – than the odd mis-spent fiver of my own youth.
All they need is their thumb
Our tech-savvy young folk think nothing of filling out applications on their phones, setting up alerts and multiple money-moving orders. They will switch provider at the drop of a hat if there’s a whiff of anything free and probably knock out a podcast on how they feel about it while they’re at it. Where I might be reaching for the ‘print’ button and a magnifying glass, all they need is their thumb. That said, all they need is their thumb to sink their savings into an unregulated crypto currency or blow the term’s maintenance loan on a gambling app. The older I get, the more I think that technology is both fantastic and disastrous. The advantage that someone my age has over younger people is that we can see both edges of the sword and – in theory at least – keep on the right side of it.
Tech – helping to manage money
So as many parents will be waving goodbye to their little darlings in the coming weeks (and many others will be anticipating the same scenario next year) they may be wondering how both they and their aspiring uni students will manage their money for the next three or so years and whether technology can help.
Friends, family and random strangers in Ikea
As ever, there are numerous ways to approach a student budget and everyone’s circumstances are different. Most people tend to adopt a strategy based on the shared experiences of friends, family members and random strangers in Ikea – whilst also gleaning fragments of information and ideas from various websites. I’m a big fan of this approach as other people’s experiences can be invaluable in helping us avoid pitfalls and pick the right path.
So, in the spirit of sharing, I will add my voice to the noise and provide my top ‘tips’ based on my own experience – and that of my Child. (Warning: this guidance comes from someone who once crossed her fingers and pleaded with a cashpoint machine to give her a fiver…).
My top tip for students
- Use the tech – get an online/app-based bank account that allows you to ringfence pots of money away from the main balance of your account so you never think you’ve got more than you can afford
- When you get your money for the term (this might be your maintenance loan and/or money you have saved yourself or from your parents) think about the things that you have to spend your money on each term: rent, bills (if not included in rent), books/materials for your course, toiletries and non-food essentials and put what you will need into separate pots so that you can’t spend the money on other things
- Whatever is left after you have budgeted for the essential stuff is for ‘Living’ – aka food, going out and having fun. It’s a good idea to divide your termly ‘food and fun’ budget by the number of weeks in the term so that you can drip feed this amount into your main balance every Sunday – other days of the week are of course available. [A little aside here, most grown-ups would list ‘food’ as an essential cost that should be kept well away from the fun budget. Experience tells me that you students don’t think like this].
Anyone studying English Lit will know what happens to the best laid plans of men, mice and students… so you might find yourself involved in complicated borrowing systems between your pots of money as invariably something will cost you more than you thought. But this is good for you. It’s forcing you to keep sight of the bigger picture while you attempt to get what you want in the here and now.
My top tip for parents
So much for the students, what of the parents? I have spoken to many parents who worry about how much they need to contribute towards their child’s uni years. There are two types of loan available from the government: a tuition loan and a maintenance loan. Whilst nearly all students can get a loan for the tuition fees, most parents find they have to put something towards the living costs and/or accommodation. The amount available for a maintenance loan is capped at various levels depending on where your household income sits on a scale, which goes from around £25,000 a year to around £70,000. The maximum that a student in England living at a uni away from home (and outside of London) can borrow per year is currently about £4,500 if their parents’ income is above the top of the scale at £70,000. This £4,500 will barely cover the accommodation costs and – in some areas – could fall short by an annual £2,500 to £3,000.
So, the first step is work out how much you will need to contribute towards the accommodation and then agree on a budget for ‘living’. There is also likely to be a deposit of around £200-300 to pay per year so you need to factor that in (along with the cost of any items that you can’t beg, steal or borrow such as duvet, crockery, bedlinen, cutlery, mugs, cuddly toy…).
With an annual figure in mind, here’s where the tips start to sound familiar:
- Use the tech – get an online/app-based bank account that allows you to ringfence pots of money away from your main balance
- Divide the annual uni amount that you have worked out by 12 and set this aside in a separate pot each month so that, as the terms comes and go, you are not caught out by this extra expense (this of course works best if you can start it three or four months before your child heads off to uni; but if you’ve missed the boat, it can still help going forwards)
- Hand a third of the annual amount over to your Child at the start of each term and cross your fingers behind your back whilst pleading with them not to spend it all at once
And finally, highest-level, crisis-point emergencies aside, try to be very clear with your student offspring that the budget is fixed and that it is up to them to live within it. They will be learning valuable life lessons at uni (along with the degree course – obvs) and this can be your gift to them. You never know, if they get to the end of the three or four years without ever having had to stand in shame before an unyielding cashpoint machine, they might even thank you.
www.talkingfinances.co.uk/blog/
Talking Finances is a trading name of Talking Finances Ltd. Talking Finances Ltd is an appointed representative of Parallel Lines The Advisor Collective Ltd, No.2 Sopwith Court, Slough Road, Datchet, Berks SL3 9AU, which is authorised and regulated by the Financial Conduct Authority. FCA Registration No. 967228
This article represents the personal opinion of Carole Haswell only and does not represent any opinion of Parallel Lines the Advisor Collective Ltd. Financial decisions should not be made on the basis of this article
