If your child is on the cusp of flying the nest, you might be filled with mixed emotions.
On one hand, it is exciting to watch your once-little children step into the big, wide world. Their futures are full of amazing opportunities just waiting to be grasped.
On the other hand, though, you might feel nervous about their ability to take care of themselves without you. If so, you may feel the need to instil them with some parting wisdom before they take the leap.
One aspect of life your child might be inexperienced in is money. Indeed, research published by MoneyAge revealed that 87% of children aged between 11 and 18 had “limited” knowledge about how to manage finances.
As a prospective student, your child may be about to receive thousands of pounds in the form of their “maintenance loan”. This loan is designed to help students pay for living expenses while they attend university.
Plus, you might have decided to give them a helping hand, offering to pay for rent, bills, or other essentials when they leave home. If you have, you may want to ensure they are spending this money sensibly.
So, here are three unmissable budgeting lessons to teach your kids before they go to university.
1. Pay yourself a “salary” out of a larger fund
If your child is set to receive a maintenance loan in September, plus any extra cash you offer to support them, this could be an overwhelming experience for them.
While they might feel excited at the prospect of being an adult with a budget to manage, if they are not careful, your child could end up spending their loan too quickly. In this instance, they could incur further debt by using credit cards, or need to ask you for further financial help.
To avoid this situation, a useful way for university students to manage their money is by paying themselves a “salary” from their student loan.
When they receive their set amount for that term, your child could:
- Transfer the entire loan into an easy access savings account, where it may earn interest
- Work out how many months the money needs to last for, and divide the loan amount by that number
- Set up a standing order that routes their monthly budget back into their current account.
By managing their finances this way, your child is effectively paying themselves a salary from a pot of money. This method helps break up their funds into smaller chunks.
Not only could this method of money management prevent your child from overspending, but it could also soothe their anxiety about being responsible for thousands of pounds for the first time.
2. Use apps to help you stay on a strict budget
Although we might nag our children to spend less time on their phones, when it comes to budgeting, digital tools could be their saving grace when they leave home.
If you attended university yourself, money management might have been a case of trial and error. Indeed, we all remember scraping the barrel at the end of the month when we had not been as responsible as we would like to admit!
Meanwhile, in the modern world, there are countless digital aids to help young people manage their finances more efficiently.
Apps like Squirrel can help your child work out their expenditure each month, labelling expenses such as rent or heating bills as essentials, as well as setting funds aside for fun.
In addition, many of these apps have multi-user functions, meaning your child could use them to split bills with others, such as housemates. So, if there is a shared cost that everyone needs to pitch in for, they can send each other reminders, or set alerts so they stay on track as a group.
These apps can also help prevent tension among students who might get caught up in who-owes-who arguments while living with their peers, not their parents, for the first time.
3. Small spends can add up to huge costs
As adults who have been budgeting for years now, we all know how easy it is to blow through your budget, while somehow not feeling like you have spent any money at all.
While there is nothing wrong with splashing out on small treats when you can, something your child might not realise at first is how easily small expenditures add up to big bills.
For example, according to Menu Price, as of August 2022, the average cost of a Starbucks latte is £3.85. This might not seem like a noticeable amount for your child to take out of their budget.
However, if they bought a Starbucks latte on their way into university five days a week, over four weeks they would spend exactly £77 on coffee.
So, as your child sets sail to new lands, it could be wise to remind them of the importance of budgeting, especially for small spends. While it is vital they kick back and have fun while living away from home for the first time, it is equally necessary that they understand the responsibilities of adult life too.
Get in touch
Want to work with an expert financial planner to help you manage your money? Get in touch with us today at DBL Asset Management.
Email email@example.com or call 01625 529 499 for more information.