With freshers week fast approaching, young people across the UK will be excitedly preparing for university.
University is where many young people get their first experience of freedom and start to learn about the world of independence and adulthood, but one of the harder lessons they come across can be financial independence. Managing a current account and staying on top of finances for the first time can feel difficult at first, so it’s important to start the education process early.
A study1 by Virgin Money found that while a reassuring 60% of UK parents trust their child to manage their own finances over the age of 18, nearly a quarter (23%) would have worries about them managing their money at university.
Nearly all (98%) UK parents said they would provide some form of financial support for their child. Nearly three in ten (29%) said they would provide support until their child secured a suitable income of their own, while 27% say they would continue to provide financial support even after their child has started working.
When it comes to complete financial independence, the study found that fathers are more likely to encourage total freedom and independence once their child has started earning an income, with 77% saying they would stop supporting their child once they were working. On the other hand, nearly one in three mothers (30%) would continue to provide support even if their child is also earning.
Katy Simpson, personal finance expert at Virgin Money, explains how parents can encourage financial awareness and independence, and teach children valuable habits and financial behaviours when it comes to budgeting, while still having a great time at university. Here are her five tips to help students develop their own financial freedom.
1. Teach them budgeting skills
Katy explains: “Some young people don’t understand budgeting when they head off to Uni for the first time, so it’s important to spend some time before they leave explaining how to do it properly to plan their spending".
“Young adults should sit together with their parents to create a budget plan, breaking down their income, in the form of student loans, part time employment, or any other financial support, and the payments they’ll be responsible for. This will help them to see how much they have for social or leisure activities every month, and every term.”
2. Encourage them to get an income
Katy shares: “It can be easy for students to rely on the ‘bank of mum and dad’ to fund their time at university, but it’s a good idea to encourage them to supplement their income if they can. Even if there are plans for the adults to support them with some of their finances, encouraging students to get their own income helps them to become more independent."
“This doesn’t have to be in the form of a job. If the student loves to shop and has plenty of clothes or other items that can be sold, this can help them to supplement their income and give them some extra money to spend on social activities.”
3. Create a plan for financial support
Katy comments: “If you are offering financial support your child’s studies, its useful for everyone to sit down and speak about who will be responsible for what bills and payments in advance of university starting."
“It may be that decide to cover a specific cost, such as accommodation, or utility bills for example, or that they will be responsible for all the bills, but you pay a monthly allowance into their current account, which they will need to budget for and plan payments themselves. Whatever the approach, it’s important to stick to it so students can get used to planning their finances around regular incomings and outgoings.”
4. Discourage bail outs
Katy says: “It’s common for students to overspend at university, whether on food shops, nights out, clothes or activities, many a parent has received a call from their child asking for more money."
“While it’s better to offer support if possible and avoid students getting behind on their bills, you should also avoid falling into a habit where this becomes the norm, as it’s important for people to learn how to manage their spending. It may feel hard short term, but if a pattern starts to develop and this becomes a regular occurrence, being firm and explaining the benefits of budgeting better, reducing spending and/or finding an additional source of income will be beneficial in the long term.”
5. Teach them the art of resisting FOMO
Katy explains: “One of the hardest things for students to get used to, is how to say ‘no’ to social activities. Nights out with friends or other social events are invaluable ways for students to bond, but they become a problem when they start to have a detrimental impact on their finances."
“It’s important to talk about how to prioritise where and how spend their money and how to socialise without breaking the bank. If they’re worried about missing out, encourage nights in with friends and looking out for free or low-cost opportunities instead.”
1Survey of 1,041 UK parents, conducted by Censuswide between 30/08/23 - 01/09/23