As your child heads off to university, there’s a natural urge to support them as much as possible. But according to Paul Stringer, director of Norton Finance Group, parents supporting their children could unknowingly hurt their financial future. He offers five reasons why uni students should be taught to take control of their own finances. I take a look.
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1. They can start building their credit score
When parents continue to pay their children’s bills, it prevents them from building a credit score. Lenders use credit scores to get information about a potential borrower’s debt repayment history.
Not having a credit history is not as bad as having a bad credit history, but it can make it difficult for lenders to offer a loan. So it makes sense for uni students to start building a credit history early. Consider letting your child pay bills for things such as their mobile phone or credit card. They should ensure they pay off the balance on their credit card in full.
2. They’ll get a mortgage more easily in future
One of the most important loans uni students will require in the future is a mortgage. And, as indicated above, they will need a good credit score.
In some cases, it’s possible to get a mortgage without a credit history, but it certainly isn’t straightforward. Without a good credit score, the only option will be no credit mortgages or no credit score mortgages, which will have much higher interest rates.
It’s much easier to get a mortgage with a good credit score because mortgage lenders can clearly see a history of paying debts on time.
3. Paying all your child’s bills could create financial dependency
As a parent, it’s important to help your child build a financial growth mindset. Paying all your child’s bills is unlikely to help. It creates financial dependency that can be difficult to change further down the line. This could lead to your child facing financial struggles later in life when you no longer support them.
Paul Stringer suggests that the ideal time to hand over financial responsibility is when your child starts university.
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4. Uni students need to learn how to manage their finances
As a uni student, your child might not be in a position to afford their current lifestyles without your financial support. This can be harmful to your child’s future. It’s important that they learn how to live within their means.
Not only will this help them become responsible with money, but it will also instil budgeting skills that play a crucial part in managing their finances in their adult life.
5. Parents get to save more
There’s no doubt that savings form a crucial part of building a financial safety net. It goes without saying that the more you save, the better, especially during your retirement years.
Encouraging your young uni student to pay their own way may free up money you could save and put towards a more comfortable retirement.
