The start of a new academic year can be an exciting time for university students. There are so many new experiences to enjoy, friendships to build, and lessons to learn.

However, managing finances as a student can be challenging, especially for those who are used to someone else holding the purse strings.

What’s more, recent data from UK Parliament has revealed that, compared to 2022, the average student’s monthly living costs increased by up to 17% in 2023.

So, if you have young people in your family who are heading off to university this autumn, read on to discover five smart financial planning tips that could help them manage their money more effectively.

1. Create a budget and stick to it

It’s never too early for your child or grandchild to start planning their student budget. Crunching the numbers as soon as they decide to go to university – or at least, when they accept a place – could help them plug any gaps in their finances, for example, through part-time work or cutting back on spending.

The simplest approach to budgeting is to add up all expected sources of income (such as a student loan and earnings from a job) and outgoings (accommodation costs, food, and so on). The difference between these two totals is the amount of disposable income left for non-essentials such as social activities, clothes, and holidays.

By assessing their finances in this way, your child or grandchild might begin to understand the difference between “needs” and” wants” – a cornerstone of effective budgeting.

Fortunately, there are plenty of mobile apps designed to help young people track their spending and stick to a budget, which can be incredibly rewarding.

Indeed, many students gain a sense of independence and confidence from budgeting well, in addition to the financial rewards of avoiding or minimising debt.

2. Avoid unnecessary credit card debt

While some student debt may be inevitable – for example, taking out a student loan to pay for tuition fees – it’s well worth avoiding unnecessary debt.

A credit card may feel like a licence to spend, but the cost of borrowing may be high. If your child or grandchild falls behind with payments, the interest could build up and spiral into a hefty debt.

There are of course benefits to using a credit card – they often provide valuable purchase protection and, if used sensibly, could contribute to a healthy credit score.

However, you might want to encourage the students in your family to use their credit card with care. For example, they could work towards clearing the balance each month to avoid interest accumulating and otherwise preserving their credit card for emergencies.

3. Keep an emergency fund

Having some money to fall back on if an unexpected event arises could offer valuable peace of mind.

For example, a broken or stolen laptop might need urgent replacement if an assignment is due.

A general rule of thumb is to aim for around three months’ worth of living costs. However, the amount that feels right will depend on your child or grandchild’s unique circumstances, needs, and ambitions.

As with budgeting, it’s a good idea to start building an emergency fund well ahead of the first day of term.

It could be tempting to splurge this money on something “fun”, such as a trip abroad or a new piece of clothing. So, hopefully, your lessons in budgeting will dissuade your child or grandchild from dipping into this fund for anything other than real emergencies.

4. Make the most of student perks and discounts

There’s certainly no shortage of student discounts available. From reduced cinema tickets to savings on fashion and generous meal deals, there are plenty of ways to reduce the cost of socialising and essential goods.

A TOTUM card (previously known as an NUS card) could be a savvy investment. For a low annual fee, your child or grandchild could gain access to thousands of offers across a range of sectors.

It may also be worth opening a student bank account. These typically offer perks that aren’t available to non-student account holders, such as travel cards – which could equate to significant savings on journeys between digs and campus or home for the holidays.

5. Ask for support

If your child or grandchild finds themselves in financial trouble or they’re feeling overwhelmed and stressed about how to manage their money, encourage them to seek help.

Most universities offer a financial support service that can help directly with money matters or signpost additional services, such as mental health and wellbeing support.

Likewise, a financial planner could act as an objective sounding board, offer helpful financial advice, and build your child or grandchild’s confidence in managing money.

Get in touch

If you’d like to know more about how to help the young people in your family plan financially for university life and beyond, please email us at hello@intelligentpensions.com or call 0800 077 8807.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.