This year 58,770 students sat their Leaving Certificate and many congratulations to them and their parents! Virtually all of them will go to 3rd level and with that all the issues that need to be addressed.
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 Begin 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 next October would leave them in a "financially difficult" position when it comes to funding their children's education.
But 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 – finishing on the 18th birthday – fund the 18th year yourself, assumed a growth rate of 5% each year, you would wind up with around €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, with the average student accepting that they will have to repay their student debt for the first 10 years of their working life by paying 30% of each month’s income. It is even 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. Here are some financial lessons to keep in mind in college and university.
For those with limited income, you can apply for a grant to ease costs. SUSI Student Universal Support Ireland) is a complicated grant process and outside most families’ eligibility especially those in the middle income bracket. Click here to check the specifics and see if you qualify.
I am sure students will know this piece of advice well by now, but I'll mention it again – shop around and also look for value. The difference between eating in one café over another might mean you have the fare to get home, or pre-packing your own lunch will be even cheaper! Your student card can also sometimes be a God-send.
If you must, borrow wisely
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 around 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 around 9.7% (€262.76 per month and an annual interest of €153.16).
Be wary of credit cards
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% (also 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!
An Post Money’s new credit card should be checked out, while Revolut is starting to gain momentum with students.
Keeping it current
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 balance, specifically 0.1%. Check out the Competition & Consumer Protection Commission’s website here for more information.
Budget, budget, budget
I would certainly suggest a student budget. 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.