Off to uni ? Time to plan your finances!

 What should your top priorities be for managing your money? And what should you avoid?

 

Living on a student loan is hard

You will probably get more money in your bank account than you have ever had before. But most students find it harder to manage than they expected.

It’s not a lot when you look at the bills for halls and the cost of living. And the system expects many students to get more money from their parents than they can afford.

But even if there was enough money, it would still be a big challenge to manage it well because of the way you are paid, in three large chunks. Too many students spend their entire first term’s money within the first few weeks!

As a system, this doesn’t make sense. You have never had to buy everything you need, from cereal to beer, books to toothpaste. With little idea what you will spend in a “normal” week, it’s hard to make good choices in fresher’s week.

Of course, many students manage well with just the odd slip-up… But for your first year, it’s good to assume that this isn’t going to be easy and do some advance planning.

Choose the right student bank account

A perk is only worth it if you will use it enough  A railcard helps less if you are living at home and going to a local uni.

Getting as big an overdraft as possible is probably sensible for most people.

This isn’t “free money”- even though you aren’t charged if you stay inside your student overdraft limit it will still have to be repaid when you stop being a student. But at least you don’t have to make any repayments while you are still at uni.

Of course, the banks want you to get used to living in an overdraft, so you will carry on with that after uni. Very profitable for them and really expensive for you.

When you have chosen a bank, open an account as soon after your uni place is confirmed as possible. Then tell the student loan company its sort code and account number by updating your details online.

You will have more fun things to do in Freshers Week than visiting a bank. And this also ensures you will get your student loan into your account as quickly as possible when you start your course.

Smarter budgeting

Even though you are paid termly, with a bit of planning, you can make this feel as though it’s monthly or weekly.

Plan to use either Starling or Monzo as your everyday spending bank. They both have features that will help you keep track of your spending. Neither has a free student overdraft, but you could combine a “student bank account” with one of these app-only banks as follows:

• look at the bills such accommodation you need to pay upfront – and a bit extra for Freshers Week. Subtract that from your termly money and divide the rest into three parts. These are going to be your monthly allowances.
• each month transfer that amount from your student bank account to your everyday spending account
• do this weekly if you prefer!
• make checking your everyday account a habit.

This isn’t going to leave any money for the long summer holiday. Fine if you expect to get a job, but not if you will be travelling or doing an unpaid intern job. In that case, you are going to have to keep enough money in your student account to fund you through the summer.

One possible way to use this is to plan on living within your student loan during term time (just pretend the overdraft doesn’t exist!)  and keep the overdraft in reserve for summer holiday expenses.

Always see if you can get a discount

A discount doesn’t save you money unless you were going to buy it anyway. If it’s not in your budget, you don’t need it however much of a bargain it is!  But there are a lot of good discounts around so always check to see if you can get one before buying something.

There are three main cards/apps:

• Unidays
• Totum
• Student Beans

Three things to avoid!

1) Don’t get a student credit card

HSBC, NatWest and TSB offer you a special “student credit card” if have your student bank account with them.

But credit cards make budgeting harder, not easier.

They may seem like a good way of solving your cash flow problem this month, but the next month you have to start repaying the credit card on top of your usual expenses.

One of the reasons suggested for getting a credit card is that it will help to build a good credit record, making it easier to get a mortgage when you are working. Which sounds like the oh so sensible, adult thing to do…

But once you have the credit card, there will always be the temptation to not repay it all this month when things are a bit tight and then the interest starts mounting up. It’s all too common for you to find after 6 months that you have used up all the credit limit and all you seem to have bought is pizza.

If you make a few credit card payments late or miss them, you will end up with a bad credit record halfway through uni. That can make your next mobile contract more expensive and make it harder to rent somewhere next year.

Have a look at what these people in their 20s say –  they’ve been where you are now and wish they hadn’t taken that first credit card.

If you are sure you can manage this, then I suggest you wait until you are in your third year.

2) Avoid Klarna and the other Buy Now Pay Later traps

Talking about avoiding temptation…

Klarna, LayBuy and all the other ways to “spread your payments” can be lethal for good budgeting habits. It is much, much too easy to overspend, and on a student grant things can be so tight you may not manage the repayments.

This is real debt you are taking on, even though it is made to feel so easy with so few checks… You are borrowing from your future self and too often your student self in 6 weeks time isn’t going to be able to make the next payment.

Do yourself a huge favour and choose to avoid them, at least in your first year.

3) Don’t get a “Future Finance” loan

These are commercial loans aimed at students. They are very expensive, not immediately but when your course finishes. You can’t defer them if you don’t get a job.

Look at every other option first and talk to your uni about help available.

Financial Emergency?

if your loan and grant money don’t arrive, talk to your uni, don’t starve in silence and don’t take out an expensive loan!

There may be hardship funds that can help and you’ll certainly get good advice.