Wealth Check: 'I don't want to rely on parents at university'

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The Independent Online

Harry Wrigley, 19, from Saffron Walden in Essex, has concerns about how he will fund his studies. "I've chosen to study a music technology course costing £8,000 a year for which there is no student loan or grants available to me.

"Whilst my parents have offered to help, I want to know if there's anything I can do to offset the cost myself," Harry says. "I find it nearly impossible to save any money as I have to run a car to take my drum kit to gigs."

Case notes

Salary: £180 per month from work, and up to £100 from doing gigs.
Monthly outgoings: car £50, food £112, leisure £150, travel £50, tax £0, parking tickets
Savings: Harry has only a current account, although his parents set up a baby bond on his behalf which he has access to, though so far has not touched.
Pension: Harry has not considered a pension scheme yet as he is not in full-time employment and has no cash to spare.
Debts: No formal debt yet, though he is keen to pay his parents back for the help they have given him over the years.

Giving advice this week are Danny Cox of Hargreaves Lansdown, David Brunning of Brunning Newman Houghton, and Steve Laird of Carrington Wealth Management...

University fees

Since there is no mainstream support for Harry's course, Steve Laird suggests: "He should check with his college to see what support is available. The earlier he can do this the better. If he has no success then he could consider applying for a Professional and Career Development Loan."

"This is basically a bank loan of £300 to £10,000 at a relatively attractive rate of interest, and that interest is paid for by the Learning and Skills Council while he is studying. He then becomes responsible for payments afterwards. Alternatively, he might want to borrow some money from his parents, and offer them a better rate of interest than they would get from a bank."

Danny Cox adds: "Harry should also investigate the possibility of a bursary (www.bursarymap.direct.gov.uk) or sponsorship from the likes of a potential future employer."

Living costs

Harry is torn between the appeal of living in London and the lower cost of commuting from his parent's house in Essex. Danny Cox suggests: "Student accommodation is likely to be a good option in the first year. It is priced competitively compared to renting privately and is an important aspect of university life."

He also suggests: "Perhaps the best way to keep debt in perspective is to have a written budget. It is surprising how spending can be contained simply by writing down every item of expenditure. Harry should avoid credit card and overdraft debt, since these are often amongst the most expensive to repay."

Steve Laird observes: "There is no doubt that it would be cheaper to live at home and commute [rail season tickets from his nearest station start at £3,200 a year compared to living in London halls of residence at £7,800 a year], but he would miss out on the social life of his college, including the London music scene, which will be important to his future career."

He adds: "His current monthly outgoings total £362 and he earns £180 from working in a shop. This means that he needs just a couple of gigs each month to break even. Things will get tougher when he starts his studies!"

Savings

Harry is concerned by the low interests rates on offer, although he is keen to have instant access to his cash in the event of a parking ticket or other unforeseen expense.

David Brunning suggests that: "As Harry has his cash in a low-interest account he could at least look at a cash ISA, where the interest would be paid tax-free.

"Instant access accounts could pay him as much as 2.8 per cent, with his monthly income or notice accounts paying more. As a non- taxpayer he may choose to use conventional rather than ISA accounts as he should receive the interest gross anyway. The income this will generate will work out at roughly £110 to £115 annually. He should retain the money on an instant access basis so that he can meet emergency or unexpected costs."

Danny Cox recommends that Harry "should split his cash between instant access emergency money and perhaps a one-year bond to obtain a better return from the balance. Chelsea Building Society is currently paying 3.75 per cent on a one-year bond."

Cox adds: "Generally, instant access accounts pay better rates of interest if you do not make any withdrawals in the first 12 months. These bonuses at the end of a year make a big difference to the return, so Harry needs to be careful not to dip into these types of account unless he needs to.

For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email wealthcheck@independent.co.uk

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