Comedian WC Fields (died 1946) was not thinking of child costs when asked how he liked children “preferably boiled” though he did raise two himself.
It is estimated that the actual current cost of raising a child from birth until completion of their 3rd level education is just short of a whopping €240,000.
Recent Bank of Ireland research revealed that 80% of parents said they do not believe the current State Child Benefit of €140 per child is sufficient to help them with their children’s education expenses.
In addition, 86% of parents surveyed for the study said that any further reductions in the child benefit allowance would leave them in a "financially difficult" position when it comes to funding their children's education.
Inversely I had worked out that if you invested that €140 Child Benefit each month in a stock market managed fund from the first month your child was born, continued it for 17 years – it finishes at age 17 – fund the 18th year yourself, assumed a growth rate of 5% each year, you would wind up with c. €42,000 the EXACT amount required to fund your child’s entire 3rd level education.
Now when I tell you that 95% of households use the Child Benefit for the precise reason of their introduction..to help families financially with their week to week living costs.. you can understand why many families are under great financial strain when their children actually reach 3rd level.
In the UK the average student debt is £44,000 (€51,163) while in the USA it is even greater where the average student accepts that they will have to repay their student debt for the first 10 years of their working life. It is inbuilt with their mortgage/rent payments. Here in Ireland, we are a far cry from that where the parents are saddled with this debt from day one.
For those with limited income, you can apply for a grant – SUSI (Student Universal Support Ireland) is a complicated grant process and outside most families’ eligibility especially those in the middle income bracket.
One of Simply Red’s best known songs says it all Money’s too tight to mention and I am sure I do not need to repeat the advice to students reading this – shop around and also look for value. The difference between McDonalds and Eddie Rockets for example might mean you have the fare to get home! Your student card can sometimes be a God-send.
As far as the financials are concerned, when it comes to student loans I would always check out your local credit union first – they generally have the best rates and are the most flexible.
Of the two pillar banks, AIB offer 8.5% (€3,000 over 1 year will cost € 261.22 per month – interest for the year amounts to €134.68) while Bank of Ireland offer 9.7% (€ 262.76 per month and an annual interest of €153.16)
Credit cards are a minefield. Most students do not have the income to repay so therefore knowing the interest rate chargeable is important. KBC Bank have the best deal on a maximum credit limit of €1,500…on purchases, their interest rate is 18.25% (the lowest!) while on cash withdrawals from ATMs, the rate is 20% (the lowest).
Late payments will attract a charge of €7 – so don’t be late! Should you 'max out' your card, you will be required to repay over a 12 month period – so on a limit of €1,500 the monthly repayment including the €30 government stamp duty will be €127.50 per month – tough when you have to study too!
When it comes to current accounts, again KBC Bank would have the edge. None of the providers including the pillar banks charge fees though the government still have their stamp duty charge on debit and ATM cards of 12 cent per transaction (to a maximum of €2.50 for ATM cards and €5 for both ATM and debit cards) However KBC Bank are the only one who offer interest on credit balances….0.1%
I would certainly suggest a student budget exercise. You should know what your total expenses are in relation to the income/grant coming in. You have two choices if your expenses exceed that income – earn more or cut costs.
Remember US President Benjamin Franklin’s wise words – Rather go to bed supperless, than rise in debt. Enjoy your studies but have fun.
John Lowe is a Fellow of the Institute of Bankers & a Personal Insolvency Practitioner, founder and managing director of Providence Finance Services Limited trading as Money Doctor and regulated by the Central Bank of Ireland (www.independentfinancialadvice.ie ), plus author of the best-selling The Money Doctor 2016 For consultations and corporate seminars, call (01) 278 5555 or email email@example.com Follow John on Twitter (@themoneydoc) Linkedin Pinterest Google+ & Facebook