A smart student swots up on their money

Sort out a bank and insurance before uni

THE excitement you felt in early August when you picked up your A-level results is probably long gone, and has now been replaced with trepidation as you and thousands of other new students prepare for life at university.

Getting a good degree is your main priority. But you’ll be more relaxed and able to focus attention on your studies if you arrive on campus with your finances all sorted.

So follow our guide for a stress-free college life:

CHOOSING THE RIGHT BANK ACCOUNT Overdrafts on the cheap

The banks are all keen to win your custom – they see you as the high earner of tomorrow, so will use giveaways and cash bribes to entice you to sign up for a student account.

Being able to borrow as much as possible interest-free will be the biggest financial benefit, and it’s worth considering a student bank account that comes with the largest interest-free overdraft.

Some banks may only offer £1,500 or £2,000 at 0%, but HSBC, Nationwide and Barclays are offering up to £3,000 (subject to application).

You may not need to use all the overdraft to start with, but if things change, that extra £1,000 interest-free is far more beneficial than the freebies and add-ons typically offered to students – it’s worth an extra £100 per year savings on overdraft charges.

Where’s the nearest branch?

Check with your university to see if there is a branch of your chosen bank on campus or in the nearest town – useful if you need to speak to someone face to face.

Sign up to online banking as a priority as you’re likely to be on a pretty tight budget so being able to see your balance 24/7 is vital.

What happens to your free overdraft once you graduate?

It may be a few years away but understanding what happens to your free overdraft after your studies may sway your decision.

Typically, your student overdraft will be switched to an interest-free graduate overdraft and, depending on who you bank with, you will get an extra two or three years to repay it.

Generosity differs: Halifax gives one year once you graduate, Santander, HSBC and Natwest give two, while Lloyds, Nationwide, TSB and Barclays offer three years.

Most banks reduce your interestfree limit each year once you graduate – for NatWest it’s £2,000 in year one and down to £1,000 in year two, for Barclays it’s £3,000 in year one, £2,000 in year two and £1,000 in year three.

There could be an issue for HSBC customers as there is a mismatch between the maximum free overdraft on its student and graduate accounts – up to £3,000 interest-free for students, but £1,500 as a graduate.

This could leave you paying 19.9% interest on overdraft balances over £1,500. So 19.9% on half of your £3,000 balance will set you back almost £300 a year.

GIVE CREDIT CARDS A MISS

If you feel you must take out a credit card, it’s a smart move to only use it for emergencies. Don’t be tempted to use it as an extension of your overdraft because unless you have the cash to clear your balance in full each month, your budget will be squeezed.

The banks will make it easy for you to apply for a card (it’s their first chance to earn some interest back from you), but credit cards are best avoided until you have a regular income. Even if you only borrow £500 on plastic it will set you back around £90 a year in interest.

BE SMART AND BUDGET

Starting university will be the first time you’ve had to seriously manage your own finances – ensuring there’s enough cash to pay for books, accommodation, food, other bills and going out.

Unless you put pen to paper and draw up a budget of what money you have coming in and what you need to pay out, you could soon end up in a mess – and be forced to go cap in hand to your parents to bail you out.

Budgeting isn’t fun or sexy, but it’s an essential life skill that can save you from worry, heartache and being clobbered with expensive charges from your bank.

A simple spreadsheet on your laptop and checking it against your bank account online every day is all it takes.

This is also a good time to sign up for your free credit report. Getting used to seeing what a report covers and learning how it works will set you up for better money management throughout your adult life.

Sign up at TotallyMoney or Clearscore and your credit report will be emailed to your inbox every month.

Best of all, the service is free.

Banks make it easy to get a credit card so they can charge you interest

DON’T FORGET INSURANCE

It’s one of the most overlooked things when students head off to university. Here’s what you need to check:

Does your parents’ cover include home insurance for students?

Before you fork out, check your parents’ home contents insurance policy as it may already cover your possessions. If you normally live with your parents outside of term time, your possessions could be covered under “contents away from the home” within their existing policy.

Next, check what the maximum limit for individual items is.

It’s normally around £1,500 – but it could be less. There may also be caveats around specific items (such as an expensive laptop) and certain circumstances (such as communal areas) – so make sure you check the policy wording carefully.

If a high-value item goes missing outside your accommodation – eg from a coffee shop or library – you probably won’t be covered under your parents’ home insurance. For more comprehensive cover, your parents may need to add personal possessions insurance.

You can buy stand-alone home insurance for students, but this often works out more expensive.

Also, find out if your student accommodation already has cover.

Around 80 universities have this core cover – so it’s worth checking. This will only be at a basic level, so ensure you know exactly what’s included.

If you’re in a rented house, building insurance should be covered by your landlord, but confirm this before signing your contract.

And is your bicycle going with you? It’s unlikely it will be covered under your parents’ policy, so add it to their insurance, or get a stand-alone policy – and invest in a good lock.