How Our Daughter Will Pay Cash for University
08 Dec, 2024
Our daughter will likely attend University or Polytech in 2026. She still has to complete Year 13 in 2025, but after that, she has some decisions to make as she attempts to answer the dreaded and most commonly asked question, “What do you want to do when you finish school?”
Going into further study is not a foregone conclusion, but it is certainly an option. As we spend the next year trying to help her decide what comes next, we will also take the time to help her (and us) financially prepare.
She has no firm plans as to what she might do, but money comes in handy, that much I know. If she/we can prepare to fund a three-year degree but she decides not to go, she will have money to put towards Plan B, C, or D.
She will have OPTIONS.
We want her to pay to study using cash. I’ve met too many ex-students who regret their student loans. Given we all know this cost is coming, we can save for it.
Firstly, I need to calculate the costs of studying and living.
This is easily enough done. While researching this post, I called a few current tertiary students and asked them about their costs in 2024. If you think I have missed something, I would appreciate it if you let me know in the comments section.
STUDENT #1
You might remember Josephine from podcast episode #92. An Adventurous 19-Year-Old. She has just finished her one-year Polytechnic course on the West Coast.
Her course fees would have been $8,900, but these were waived due to the “first-year fees free” government policy that has unfortunately been scrapped. Students must now pay in full (using cash or debt) before starting.
Her rent in student accommodation was $166 per week for 34 weeks, $5,644 in total. She also paid $764 before moving in; $350 of this was a bond, which was returned at the end. She was ineligible for a student allowance or accommodation benefit due to her parent's income, and the lecturers clarified that there would be very little time to do any paid work during the semester due to course pressures. She said that proved to be true.
She used savings from her summer hospitality work to purchase $2,000 of outdoor gear required to complete her course.
Her parents agreed to pay her $192 per week for 34 weeks to cover her rent of $166, leaving $26 to put towards her food costs. If she needed to visit a doctor, dentist, physio, or what have you, they said they would also cover those costs as and when required. She had been saving hard to cover all other expenses, but right when she was about to begin, her grandparents gifted her $5,000, which they paid out to her over the 34-week course, giving her $147 weekly. This more than covered her food costs.
This $339 reliable weekly income was a massive help in covering all her expenses. It totalled $11,526 for her 34-week course.
Because she was studying well away from a city, made the strategic decision not to have a car, and kept her food and alcohol costs to a minimum, she could get by on this money. In fact, she even used a little of her weekly funds to continue investing and kept her savings account largely intact.
At the end of her course, she had no student loan or other debt and transitioned straight into well-paid full-time work. She is loving life.
TOTAL COST: If she had to pay her first-year course fees, as all students now have to, it would have cost her approximately $17,000. Fees-free made a huge difference, so it is such a shame it was scrapped. This works out to $326 a week for a full calendar year.
STUDENT #2
I also spoke with a second-year nursing student from Dunedin about her education costs.
In 2024, her course fees were $8,300, which had to be paid in full before her course started. She used a student loan for this. She did not take out the $1,000 additional loan for course-related costs.
To cover her rent and living expenses in 2024, she borrowed $281 weekly, which is applied to her student loan using StudyLink. This amount used to be the maximum you could borrow, but it has now been increased to $316. To keep her borrowing down, she stuck with the lower amount. Most of this pays her weekly rent of $210 ($10,920 annually). She and three others rent a house together. Next year, her rent will increase to $217.50 or $11,310 annually. She is locked into a 12-month lease, so she still pays rent even when she leaves the city to chase holiday work.
She puts $20 a week aside in a savings account to cover her part of the power/broadband monthly bill. She spends about $40 a week on food. Unsurprisingly, she said that it's been a stretch.
Her course has an unpredictable schedule, with some weeks spent entirely in the classroom and others spent out on placement in the community. Therefore, she has been unsuccessful in finding a job to fit around her study. She works during the long summer break instead, and these savings can be used during the year as needed.
Her parents have kept her on their phone plans, so she doesn’t have that expense, and they don’t give her a set amount of money each week but help her if required.
TOTAL COST: Approximately $23,000. This works out to $442 a week for a full calendar year.
Becoming uber frugal is crucial.
The students I spoke with study in a different town from their parents and are incredibly diligent, very organised and frugal with the little money they have. The most significant expenses are accommodation costs and then course fees. Some expenses are due upfront (fees), and others are paid weekly (rent). While both are friendly and social, neither are interested in paying to drink, shop or attend festivals, which keeps their living costs very low. I could not survive on what they live on!
Student #3
There was a third student I learned about. A friend has a daughter who is studying engineering at a university in Sydney. From our chats, it costs a lot more, about $1,000 a week, give or take, for accommodation, course fees, additional course expenses, flights home and living costs.
Studying in Australia is an option. Like me, my daughter is also an Australian citizen, and it crossed our minds that it's worth her looking into studying there. If that happens, Jonny and I would also consider relocating there for a spell simply because we fancy a change of scene.
Hall of Residence Costs
One last cost I looked into is the approximate cost of living in a Hall of Residence in the first year. Currently, they cost about $22,000, plus there may be additional accommodation costs in mid-semester breaks or on either side of the academic year, which runs roughly from February through November.
Estimate to study beginning in 2026.
Given my basic research, an estimated cost for studying for a three-year degree would be about $30,000 a year. I’ve gone on the high side because I’d rather she/we over-save than under-save. This is $576 weekly for 52 weeks or $882 weekly for 34 weeks. To budget, I prefer to spread the cost out over a year.
I’m also keeping an eye on what the government is doing. They have already thrown a spanner in the works by scrapping the first-year fees free, which instantly loaded a $8,000 - $9,000 cost on future students. While they have indicated that the third year will be fee-free, from what I understand, you still have to pay your fees in full at the beginning of your third year. After completing the course, you ask the IRD for a rebate of those fees. It is still far from clear. What is clear is that the third year is NOT fee-free, given you have to pay it upfront, in full.
We have yet to determine what city she should study in. Therefore, we don’t know if her first year will be in a Hall of Residence or renting. Jonny and I feel like a change of scene and have not ruled out moving around Aotearoa or to Australia, and if we moved to the city she was studying in, she would likely remain living at home for free to eliminate the considerable cost of accommodation.
How will she cash flow $576 per week?
Much like us, it is likely that she will have income from several sources. Much like us, we will teach her to create sinking funds well before her academic year begins so that she has preloaded bank accounts to cover various expenses. One for fees, one for rent, one for food, etc.
Based on our current household income, she might be eligible for a small weekly student allowance of about $120. She would not have to pay this back. Based on our current household income, I used this StudyLink calculator to understand how much she might be entitled to per week after tax.
She may also qualify for an accommodation benefit of about $60 a week if eligible for a student allowance. It depends on her living situation. She would not have to pay this back.
She would get a part-time job, as there are opportunities to earn an income that can fit around studying. Working about eight hours a week, making $200 after tax, would be a huge help. You can earn up to $270 a week before tax affects a student allowance.
She has already saved/invested $25,000 from years of working. She would draw a lump sum as required and a small weekly amount, perhaps $100, to use as income.
This all adds up to $480 a week. We would give her a weekly allowance of $96 to make up the shortfall. More if required.
These are all just scenarios and ideas where everything is up for discussion. The fact that an academic year is about 34 weeks throws a spanner in the budget, but it gives us a base upon which to build.
Scholarships and Donations
She will also apply for scholarships to offset costs, aiming to secure as much money as possible. I’ve been collating a list of scholarship resources; her school is very proactive in helping students apply.
As we explored every avenue in our planning, I was aware that grandparents sometimes offer to pay towards education, so we also asked our parents (her grandparents) if they had any intention of supporting her financially in any way if she were to go to university. They said no.
Therefore, now that we know where the money will come from, we can make some good plans.
To succeed, she has to be able to budget.
The higher costs are paid in instalments as the year progresses. For example, a hall of residence may have a fee schedule of four instalments spread across a year. Tuition is paid at the beginning of each semester. The rest are weekly expenses, such as food, or monthly, such as internet.
I’ve been pushing the budgeting message more frequently this year because I need her to understand how to manage money before she leaves home—especially given that she will have multiple expenses to be paid at varying times and potentially be getting income from various sources. I signed her up to PocketSmith in early 2024 and have largely left her to it; as you could say, she ‘resists’ my offers of help. I like the fact she wants her independence here. But I check in every month or two and help if asked, and I can now see she is using it pretty well. If she can manage her small income and expenses while living at home, she will quickly adjust to the bigger costs proposed above.
Jonny and I WANT to support our child financially.
Jonny and I want to help her financially through tertiary education. We would be proud to do so. Getting her through study debt-free will be a family effort, with each of us pulling our weight.
We disagree with the “let them work it out themselves” approach to paying for study. Nor the “it’s interest-free or good debt” attitude to student loans. Many parents give our 18/19-year-olds far more credit for their financial prowess than they deserve. Many are floundering. I’ve spoken to too many aggrieved ex-students who wish they had known there was a way to avoid bumbling into student debt. They simply had NO idea what they were getting into and could never foresee its impact on future travel, marriage, house buying or having a child.
Paying 12% of their income to their student loan curbs their other plans. And for women, when they stop working to have a child or simply earn less than their male counterparts, student loan debt is a millstone around their neck.
Not on my watch. Why would we do that to our daughter?
Readers of The Happy Saver have watched us slowly grow our wealth. We are saving up for known and unknown expenses. The prospect of her going to study at a university or a polytech has always been on our radar. I’ve kept loosely in touch with annual costs, and I’m taking some time to zero in on them now so we three can get our ducks in a row.
She will be paying a lot of her costs, and given she has invested 50% of every dollar she has ever earned (because I made her) from her weekly part-time job and from her summer work, she is already in a solid financial position with one more year of school to go.
If you have a future or current tertiary student, I hope this blog post has given you a few things to consider and has opened up a discussion in your household.
It has in ours, and as time passes, I’ll let you know how it all pans out.
