You have the A level grades – well done! There are now just a few weeks to get organised for uni in September 2019.
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 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:
- people with years of experience of budgeting would find it hard to manage being paid every three months rather than monthly;
- 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.
The Student Awards Agency for Scotland manages to make monthly payments to students in Scotland so why can’t this happen in England?
Of course, some 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
MoneySavingExpert has a good guide to the options for bank accounts in 2019-20 and lets you choose three to compare.
A perk is only worth it if you will use it… so a railcard is worth a lot less if you are living at home and going to a local uni than if you will be travelling a long way at the start and end of each term.
Getting as big an overdrafts 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 are hoping that you will get used to living in an overdraft and that you will carry on with that after uni – nicely profitable for them and really expensive for you!
When you have chosen a bank, go to your local branch to 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.
Not only will you have more fun things to do in Freshers Week than visiting a bank, this ensures you will get your student loan into your account as quickly as possible when you start your course.
Why you should NOT get a student credit card
Several banks offer you a special “student credit card” if you bank with them. Here’s one example:
If you’re at college or university and have had a xxxxx Student Current Account for at least the last three months, our Student Mastercard could give you that extra flexibility when you need it most.
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.
You aren’t really borrowing from the credit card lender, you are borrowing from your future self!
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.
Won’t it help your credit record?
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, grown-up thing to do…
A credit card repaid in full each month doesn’t incur any interest and will help get you a good credit record.
But few students have the will-power to use a credit card like this. Once you have the credit card, there will always be the temptation to not repay it all this month when thing are a bit tight and then the interest starts mounting up.
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.
After uni, the positive marks you have got if you use a credit card perfectly aren’t going to be that important. But any negative marks will matter a lot, and they will stay on your credit record for 6 years or more.
Students have a lot more to lose from getting a credit card than they have to gain.
There are other, less risky, ways of improving your credit record when you are at uni:
- Get yourself on the electoral roll so you can vote. This matters for credit scoring so do this even if you have little interest in politics.
- making payments on time to a mobile contract may also go on your credit record as positive ticks.
- if you (or your parents?) can save £20 a month, look at LOQBOX.
Perhaps you are thinking that you can manage your money fine and that a credit card would just be convenient.
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.
If you get through two years of budgeting and still feel confident, that would be a good time to get a credit card. But for the first couple of years, do yourself a huge favour and choose not to have that source of temptation.
Even though you are paid termly, with a bit of thought in advance, you can make this feel as though it’s monthly – or even weekly if you would prefer:
- look at the bills such accommodation you need to pay up front (and a bit extra for Freshers Week?), subtract that from your termly money and divide the rest into three – these are going to be your monthly allowance.
- go to your bank and open a savings account – it doesn’t matter that the interest rate is zero or pathetically small, this is for budgeting not earning interest.
- transfer the next two months money from your current account to the savings account.
- then next month “pay yourself” the next month allowance.
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 put money aside to fund you through that.
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.
It’s a good idea to making checking your bank account a habit. Obviously, there is your bank’s mobile app, but also have a look at other apps that can help you monitor not just your balance but also what you are spending the money on.
Have a look at these apps that help you budget and save money.
Other uni finance planning
- if your loan and grant money don’t arrive, talk to your uni, don’t starve in silence! There may be hardship funds that can help and you’ll certainly get good advice.
- take your student card everywhere with you and ALWAYS ask for a discount.
- get yourself the Student Money Manual from The Money Charity. It’s free!
This article is updated every year with the latest links and news.