Personal Finance: It's time for a cunning plan

In the second of our student series, John Andrew tells parents how to estimate the costs of university life

The academic goals of most sixth formers leaving school this summer have now been settled. The time between receiving exam results and starting a course of higher education may seem to be a period of limbo, but there are many things to do.

Surveys by the National Union of Students and the experience of parents with offspring in higher education both indicate that even the maximum level of State funding is inadequate. It is not unusual for a student to graduate with a five-figure debt. Furthermore, around 40 per cent of students have part-time jobs during term time and four in 10 work between 12 and 20 hours a week. Two-thirds say such work adversely affects their studies.

So, if you are in a position to help fund your family through university, how much is it likely to cost? Regional differences in accommodation costs and individual circumstances mean the only way forward is to draw up a budget based on your son or daughter's situation. Make it a family project as opposed to a parental exercise. This is one of the best ways to avoid future acrimony over finances.

Managed properly, it will result in a meeting of minds. You will appreciate the financial aspects of student life and your son or daughter will have a basic framework for managing their affairs. Naturally, as with all budgets, it must not be viewed as set on a tablet of stone. It is unlikely to be perfectly accurate.

Begin with accommodation as this accounts for 60 per cent of most students' expenses. The university accommodation officer can tell you the cost of the various options available; living in hall, digs, or sharing a house. Availability is also a determining factor. Where there is a shortage of student living space, the earlier this is sorted out, the better. The most convenient accommodation goes first, so early birds will reduce their local travel time and fares.

Having established the cost of the highest spend in the budget, the rest is fairly easy. The means-tested pounds 1,025 tuition fees are a known commitment. Other factors to consider include; books and equipment, food, travel costs, laundry, toiletries, entertainment and insuring property.

It can be very worthwhile for offspring and parents to have a chat with a student or two whose parents live in your neighbourhood. Learn from their experiences. It is surprising what good tips will be passed on.

Having formed your basic framework, it is essential to look at the timing of the payments. It is usual for the parental income to be regular, while the bulk of a student's expenditure falls at the beginning of a term. However, parents usually opt for monthly contributions to their offspring's expenses to coincide with their salary cheque.

If the family finances cannot produce a larger sum at the beginning of term, what is to be done? Ones immediate solution may be to draw on a Student Loan. However, there is no guarantee this will be available at the start of term. Parents may consider borrowing the temporary shortfall but this will result in paying commercial interest rates. However, all the banks, as part of their student packages, offer an interest-free overdraft. It is far better for the student to arrange to borrow any shortfall at the beginning of term, repaying the overdrawn position as and when the Student Loan is available.

Remember that this is probably the first time your son or daughter has had a sizeable amount of money to manage on their own. The last thing they will want is a lecture on how to budget, but it is prudent to introduce the subject of money management diplomatically.

There is still no guarantee that even the best laid budget plans will not go awry. However, if the process helps to create an atmosphere in which your son or daughter feels they can openly talk through financial, or other problems, with you, it could help prevent a disaster later on.