Little money mistakes when you’re a student can cause much bigger problems down the line, so getting your money sorted before you head off is a must. Here are 5 things that will help you to uni-proof your finances.
Living life on a budget can be a tricky thing to get used to, especially when university life is more expensive than ever before. But getting your money organised before you go will help you to sail through uni financially unscathed. Here are 5 things you must do:
1. A good current account is a must
A good student account will be the hub of your finances throughout university. It’s the place where your student loan can be paid in and where all your bills will go out. So making sure you’ve got the best account for you is really important.
When you're a student banks really want you to open accounts with them in the hope of keeping your custom after university and into working life. They know that students are likely to be valuable customers in the future so offer extra benefits to entice you in. However, while these added perks are worth looking at - you need to be smarter if you really want to get the best deal.
One of the major benefits available with most student accounts is an interest free overdraft. This is where the bank lets you spend money you don’t have, for free, to help pay for student essentials – and by that we don’t mean drinking! These ‘free’ overdrafts often start with limits around £500 and can gradually be increased every year to anything up to £3,000 in your final year.
While it may be tempting to go for the account that offers the largest interest free overdraft it's important to bear in mind that it’s a limit to your spending not a target. So, while it is free to use these overdrafts while you’re a student they all have to be paid back - with interest - after you graduate.
It’s worth noting that if you continually go over your limit or break the terms and conditions your free overdraft can be removed at any point – leaving you paying interest on anything you owe. That said, when you’re comparing the interest free overdraft limit on offer it’s important to look at the charges that you’ll be hit with if you go over any limit just in case.
An interest free overdraft isn’t the only facility that you should look for when you compare accounts. Easy access, online/mobile banking facilities and a cheque books (if you think you might need one) are all other factors worth taking into account.
It’s also well worth comparing the extra benefits on offer, as student current accounts are renowned for their ‘perks’ - free student railcards, discounts on laptops and other benefits such as travel insurance seem to be the favoured option. While you shouldn’t base your decision solely on these perks they certainly might sweeten the deal of any account that meet your other banking needs!
Once you've found the account that’s right for you it’s a good idea to get it set up before you move out.
So while you’re in demand - shop around!
You can compare all the features and benefits of all the student current accounts on offer in our student current account comparison table.
2. Student credit cards should be treated with extreme caution
Most banks offer a student credit card with their student accounts. However, you need to treat them with extreme caution.
First and foremost, they tend to be a very expensive way to borrow, charging anything up to 40% APR if you don’t settle in full when you get your first bill.
Secondly, fail to make a payment on time and not only will you be hit by a late payment fee by the bank but it could also damage your credit rating which could lead to problems getting a mortgage or loan further down the line.
Finally, one of the biggest pitfalls to avoid is withdrawing cash using your credit card. Unlike debit cards, drawing cash off your credit card works out as a really expensive way to get your hands on some extra money. You will be charged interest – usually at a higher rate- on any amount you take out of the ATM (or get as cashback) until you pay off the debt and will also need to pay a handling fee of around £5 or 3% (whichever is greater).
So, by all means get a student credit card but if you’re not good with money, keep it ‘in case of an emergency’ only.
3. Contents insurance is an essential - not a 'nice to have'
Moving into student accommodation can be a daunting prospect – and what with having to paying the rent, bills and food, adding another expense to the list can seem like the last thing worth doing.
However sorting out contents cover for your belongings could prove invaluable.
Thieves often target student accommodation knowing that most rooms will contain laptops, mp3 players, TVs as well as other valuables. In fact people aged between 16 and 24 are three times more likely to fall victim to a burglary than any other age group. So getting some cover sorted is a must.
When looking at arranging contents cover you will need to work out how much all the belongings you have in halls would cost to replace – this will be your ‘sum insured’. You’ll also need to check whether expensive items such as computers are covered automatically, or if they have to be listed on your policy separately.
Many insurance companies offer tailor made student insurance designed to cover you while living in shared accommodation. These policies are designed for student so are usually a little more affordable but remember to check exactly when you are covered, few companies will cover you if you leave a window wide open when you go out.
Make sure you know exactly what’s covered and play by the rules so you don’t get caught out if the worst happens.
4. Budgeting isn't boring, it's smart
Before you leave for university it’s a really good idea to put together a rough budget for each term to make sure you don’t run out of cash.
Firstly you need to work out your income; how much will your student loan payments be? Do you expect to get any money from part time work or from family members?
Once you’ve established what you have coming in, then you will need to work out what you will be spending on compulsory bills such as tuition fees, accommodation, insurance, food and household bills.
Doing this should leave you with a better idea of how much money you can afford to spend on enjoying student life and help you to avoid racking up lot of unnecessary debt.
Once you’ve set out a budget you may also want to consider opening a second bank account for your ‘fun’ money and allocate so much a month from your main student account. This could help prevent you from spending money you need to pay bills!
5. You get extra ways to save
When you do start life as a student lots of companies will offer you discounts when you flash your student card. From everyday essentials such as utilities and clothing to more fun stuff like laptops and concert tickets - being a student usually means you can avoid paying the full price so make the most of it!
That said, remember to shop around and don’t get too carried away, as mentioned earlier it’s not a race to reach that overdraft limit!
