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How can parents help their kids get ready for the first step to financial independence

POSTED: 22nd August 2013
IN: Personal Guides
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Tens of thousands of students are preparing to move out of home for the first time and head off to university after receiving their A-level results.

Tens of thousands of students are preparing to move out of home for the first time and head off to university after receiving their A-level results. undefined

The excitement and freedom of living alone for the first time is tempered by the realisation that with it comes financial responsibilities.

So, as a parent, how can you help your child prepare for their first taste of financial independence?

The cost of being a student has risen with the introduction of tuition fees of up to £9,000 a year. Students receive a grant for this and a maintenance grant of up to £5,500 outside of London or up to £7,675 in London. Both are repayable once the student earns over £21,000 a year at a rate of nine per cent of net income.

Budgeting

A quick course on money management is vital before your child heads off to university with their first maintenance grant in their bank account.

Emphasise that they need to pay their accommodation costs for the term in full. Then advise them to divide the remaining amount by the number of weeks until they receive their next grant.

If they have any other income from a part-time job or other source, add this to the amount to be divided by the number of weeks to work out a weekly budget.

Student bank accounts

A good starting point is to choose the right student bank account, a current account that offers the best benefits.

As a new student, banks are trying to win your custom in the hope that you will go on to bank with them for many years.

This means there are some good offers available. Probably the most important factor to consider is the level of interest-free overdraft available. It is likely that a student will need this during their studies and represents one of the only times in life when you can borrow up to £3,000 without paying any interest.

Student insurance

The typical student takes around £2,000 worth of electrical equipment with them, including laptops, iPod’s, games consoles, musical equipment, mobile phones and more.

Student halls and residences are more likely than the average property to be robbed as more people come and go.

Therefore, it is vital to take out a good contents insurance policy. This can be done as a stand-alone policy or as part of your own policy. Just be careful though, if you are putting your child onto your own home insurance policy as any claim will raise the cost of your own policy and there are many exclusions.

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