"We can, and do, rest easy, secure in the knowledge that our financial interests are in good hands..."

G & J

Funding Tertiary Studies

Before your child gets to year 12 at school, if they want to do well academically, they need to get into the learning habit. It is the results from Year 12, that will determine their eligibility for university scholarships, what courses they may be eligible to apply for, and very importantly access to University hostels and flats. This is a year earlier in their lives than what most students realise and may come as a shock to parents.

A worry for parents and students alike is how they will financially manage. The dilemma is how to fund the process. For parents, it may be a matter of setting aside monies to assist with their child’s tertiary education. Should the parents simply pay out the money to their child? Or should their child get a student loan which is interest free? Or should the child have saved through holiday jobs, or after school work?

Student loans are interest free, however they can only be used for specific purposes such as course fees. Once the student is in the New Zealand workforce, this is paid back to Inland Revenue. If the borrower heads off overseas to work, interest is charged on the loan.

Certain students qualify for a student allowance. Eligibility is generally based on their parent’s income and includes any family trust or business income. It is not asset based. The maximum allowance occurs when the combined parent income is less than around $55,000 per year. Once it is above $91,850 the allowance is lost.

Even the highest allowance level, still falls well short of the costs for example, of student halls of residence. Depending on which university and which hostel the cost may be in the region of $360 per week, which is paid for around 38 weeks a year.

Another great way of receiving funding is through scholarships. These may be offered by the various universities, iwi, service groups and others. Top students at university may be asked to tutor lab sessions, tutorials or marking. These provide great part time work at attractive pay rates.

Occasionally, grandparents leave their grandchildren bequests to be used for educational funding. This is a nice way for them to assist their grandchildren through tertiary studies.

Parents could consider dangling a financial carrot, so the children get serious about saving. For example, they could equal the amount saved. That way wasting say $15 on takeaways by the teenager working part-time and saving for university, effectively would be $30 lost. It brings with it a need for the child to budget which is a very good life skill to have.

So, what is the best course of action? It will depend on the individual’s situation. Utilize any student loans and allowances, research and apply for scholarships, but above all save and don’t waste money. We suggest starting early, and develop a plan. Students tend to value their studies more when they have their own financial commitment. Those whose parents provide the funding on a plate, may find that their son or daughter will not be as committed to succeed academically.

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Whakatane based Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.