Learn to manage your money before uni
Plan ahead to make the most of your finances
JUST two weeks ago students received their A-level results, and by now many will have hopefully bagged a place at their firstchoice university.
But with increasing numbers of horror stories about student debt and money worries, we’ve decided to help make university life less stressful with a five-step guide to the key things you need to get to grips with before you set off.
PICK THE BEST BANK ACCOUNT
Don’t leave it until the last minute and end up rushing your decision about who to bank with. Start comparing accounts now so you get the one that works best for you.
For many cash-strapped students the account offering the largest interest-free overdraft will be the main priority as it will help keep borrowing costs down.
Most banks limit the amount they will lend interest-free in year one, which is a sensible move – with limits typically between £1,000 and £1,500. Be aware that you have to apply for any overdraft limit – it’s not automatically set up on your account.
Barclays, Nationwide and HSBC all offer up to £2,000 interest-free in year two and £3,000 in year three. Whereas TSB, Santander and Lloyds only offer a maximum of £1,500 in year three.
Having to pay interest on that extra £1,500 for TSB would set you back 8.21% in interest plus a £6 usage fee each month – so could cost more than £190 in 12 months.
All the banks will look to woo you with freebies but a higher interest-free overdraft limit will be the smarter financial move.
If the free overdraft isn’t a priority, Santander offers a free four-year 16-25 railcard or NatWest/RBS has a fouryear National Express Young Persons Coach card, giving a third off fares.
CREDIT CARDS AND YOUR CREDIT RECORD
Avoid taking out a credit card unless you trust yourself to use it wisely – by that we mean paying the balance off in full every month so you don’t get hit with interest charges.
Don’t be tempted to use it as an extension of an overdraft and student loans – your budget will be stretched to breaking point if you have to fork out interest charges of 20%-plus.
Also get to grips with your credit record. Up until now you probably haven’t borrowed any money or appeared on the electoral register but from the age of 18 that changes.
Get a free copy of your credit record and credit score from Totallymoney or ClearScore – it’s definitely worth signing up to one of these services and keeping an eye on it. Future lenders will refer to it when deciding whether or not to agree your application for everything from mobile phone contracts to mortgages.
GET INTO THE HABIT OF BUDGETING
Unless you draw up a budget of your incomings and outgoings, you could soon get in a mess and be forced to go cap in hand to your parents for help.
Budgeting isn’t fun or sexy but it’s an essential life skill that will save you from worry and being hit with bank charges.
Creating a spreadsheet on a laptop will help ensure you have a handle on your money matters and know how much you’ve got to last you until the end of term.
DON’T FRET ABOUT STUDENT LOAN DEBT
With recent reports that the average person will leave university owing around £50,000 in student loans, many parents and students are anxious.
The key thing to remember is that though total debt figures are high, it’s the amount you have to repay that’s important to understand.
Repayments on student loans begin in the April following graduation, but only if you’re earning more than £21,000. If you are earning less you don’t need to make repayments.
Repayments are calculated at 9% on everything you earn above £21,000 – so, if you earn £31,000 you’ll pay £900 per year – deducted in equal monthly instalments of £75 by your employer direct from your pay. Any balance on student loans after 30 years is automatically written off, won’t appear on your credit record or be passed to debt collectors.
Visit gov.uk/applyonline-for-studentfinance for details, or call Student Finance England on 0300 100 0607. There are two types of student loan: Tuition fee loan – up to £9,250 per year. Maintenance loan ( for living expenses) up to £7,097 per year if living with parents, £8,430 if living away from home (£11,002 in London).
INSURANCE IS IMPORTANT
Insurance is one of the things often overlooked by students. We asked insurance guru Adam Powell from Policy Expert for a few pointers on what to consider. There are three ways for students to get insurance:
Existing family home insurance – some of the more comprehensive standard home insurance policies include cover for family members when they’re away at university.
Stand-alone cover – specialist cover for students. Usually the most comprehensive option, but it can be expensive.
University accommodation insurance – many universities offer cover for students living in halls and other types of university-owned accommodation. Can be good value as you don’t “pay” extra
for it, but it can be limited in scope. The key things to consider when buying a policy are:
Does my existing home insurance offer cover?
Does cover include possessions out and about on campus and getting to and from university? Most policies charge extra for this.
Check claim limits are sufficient, especially as students typically now own a lot of hi-tech, expensive gadgets.
Check what’s included – some policies place greater restrictions on what students can and can’t claim for.
Exclusions can be stricter for students. Many policies insist on a lock on a door, or won’t allow claims for thefts from “non-secure” places, such as on campus.
Does the policy include accidental damage cover? Can it be added for a small fee?
Students typically don’t have much money, so check how big the excess is if you make a claim.