How To Draw Up A Student Budget and Stick To It

It can be a confusing and daunting experience leaving home for the first time. One of the biggest challenges will be keeping on top of money issues.

Let’s start right at the beginning: budgeting. To some teenagers this might sound pretty boring, but it’s an absolute essential.

It’s important to realise that debt plays a big role in the budget.

Most of the cash a student has to spend is going to be borrowed money. That’s an inevitable feature of modern university life. But students must still realise it’ll need paying back at some stage.  That means squandering it willy-nilly is not on the menu.

‘Debt is a part of the way you fund university,’ says Steve Rees, a debt consultant at Vincent Bond. ‘It’s about getting the right sort of debt – student loans and overdrafts – and then creating a budget to keep control.

‘If you can help your son or daughter work out in the back of their mind what they have to spend each week after bills, it’s a great place to start.’

How to make a student budget

Assuming that your fees are already paid, here’s a plan of action:

  • Work out what’s available to spend (loans, grants, income from job etc.)
  • Work out likely costs (prioritise necessities)
  • Put a weekly cap on certain types of spending (nights out, takeaways etc.)
  • Keep tabs as you go (use bank statements as a tool to help)

Work out ‘income’

A student’s income should include any money from student loans and grants, earnings or savings from a part-time job or holiday job, and any money given as gifts.

Don’t include the interest-free overdraft (see section on student banking). This should be no more than a cushion. Your son or daughter will need to fall back on it at some stage and it’s best left that way. We take a look at an example below:

Possible yearly income

Maintenance loan: This will vary according to where school leavers choose to study. University-goers in London will be given up to £7,751, while those in the rest on England are paid up to £5,555.

[Grant: up to £3,387*]

Earnings: £3,000 (from summer and part-time term work)

+ Money from family: £200

* Not all students will receive a maintenance grant. The amount will depend on household incomes and the maintenance loan available will fall for those given a student grant.

Someone who comes from a household earning less than £25,000 will be eligible for a grant of up to £3,387, but will only receive a loan of up to £3,862 a year. This means a total of £7,249.

TOTAL for someone paid a full maintenance grant: £10,449

Divide this into weekly chunks. That makes it more manageable – particularly because rent is typically advertised or listed on a per week basis on most university campuses and by many landlords, despite normally being paid monthly or termly.

Using the example above, that leaves £348-ish a week over a 30 week term. Next, work out a weekly spend on absolute essentials and see where it leaves you.

Remember you will need to budget for spending during the holidays, as although outgoings will be less for those returning home any holiday spending will need to be factored in too.

Work out spending

For a teenager heading off for his or her first year, working out the costs is a little tricky. For that reason, we’ve tried to come up with a very basic guide to spending to give you a (very) rough idea.

Weekly spend on essentials:

Rent: If living in halls, check the university prospectus for details because bills are often included. Rent varies for private student accommodation, and typically costs between £60 and £140 a week.

Bills (if in private rented): £15 is a very rough estimate

Food: £40

After these essentials, spending varies greatly. It just depends on the individual and their location.

The average student is likely to spend between £68 and £156 each week to cover the cost of food, activities and university supplies, according to a recent survey of 20 UK universities by HSBC.

The average total spend each week came out at £249.68 – and included the price of two bottles of wine, five pints, rent in halls, a bus pass, as well as the essential costs above.

Costs in freshers’ week will of course be much higher than an average week on campus. Therefore once students have settled in it could be a good idea to review their average spending habits again using their bank statements to create a budget.

Try not to forget the little extras, looking at everything you are likely to buy in a week, factoring in the costs of going out, alcoholic and non-alcoholic drinks, clothes, travel, mobiles, toiletries, DVDs and movie subscriptions, internet use and music downloads.

It is also a good idea to build up a contingency fund for one-off extras or purchases you will likely have to make just a few times a term rather than weekly such as course books, any other course-related equipment, excursions, stationary, printing / photocopying and club memberships.

Halls vs. private rented?

A good rule of thumb is to expect to spend around £80 a week for rent on private accommodation. the individual costs again vary dramatically according to the univeristy town chosen, with prices ranging from £64 to £144 across the 20 universities in HSBC’s survey.

It really depends on the location but halls can sometimes be cheaper than private renting but that’s usually not the case.

It’s not as simple as choosing between the two. Usually, students will spend their first year in halls and then move out into private rented digs after. Sometimes it’s compulsory. This actually makes a great deal of sense – after a year, a student will have found others to share a house with.

Help with finding somewhere to live can be found at Acorn Properties.

What about living at home?

More and more students are now choosing to live at home and commute to campus in order to make university more affordable in the face of sky-high fees.

This can lower costs dramatically, cutting out accommodation costs, which for the average student reach 24,000 over the 30 weeks of term time.

Remember, transport costs can creep up though as students will have to consider the costs of owning and running a car or getting to campus by train or bus.

Maintenence grants will also be capped, a student living at home starting this September will be paid up to £4,418.

Shared houses and paying bills

A helpful way for students to manage money in a house-share is to set up a kitty so everyone contributes to the essentials – loo roll, tea bags, bread and milk, etc. Suggest this as a way to avoid buying too many of the same item unnecessarily and make sure one person doesn’t end up bearing the brunt of the costs.

When it comes to paying bills for utilities, TV licence or broadband, at the very least students should ensure that all paperwork and bills are kept safely for reference to save on arguments when it comes to paying up.

It is possible to open a joint house account – a basic current account that everyone can pay into and all payments and direct debits can be taken from. It’s worth a student investigating this with their friends.

Managing spending

Now it’s all about keeping tabs on the ‘outs’ budget column. Advise your child to keep all their bank statements (or make regular notes if they don’t get paper versions).

Make sure they know how much they can safely spend per week. Of course, the real trick is sticking to it. See our money saving tips section for a few cost-cutting ideas.

It’s also an excellent plan to ask them to set and stick to a weekly cap on certain types of spending – nights out, alcohol and takeaways, for example.

It’s worthwhile reminding students that small things like takeaways and nights out all add up at the end of the month and to keep an eye on how much they spend on things like this.

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