Students: How To Protect Against Recession

If you're a student, how can you prepare for the recession that may be on the cards?

This article first appeared in our email series on Recession Virgins and Recession Veterans.

The Fool's latest report, Cracking The Credit Crunch, investigates how Britons are preparing for a possible recession.

But we're not all in the same boat. There are `recession veterans', who've been through this sort of downturn before. And there are `recession virgins': people of around 35 and under, for whom it's going to be an entirely new experience.

An economic downturn may not lead to mass unemployment - but it is likely to mean fewer jobs on offer and choosier employers.

Students are one group of `virgins' who may be in a particularly vulnerable position. If recession does bite, new graduates - with big debts and no employment record - may be among the hardest hit.

Recent research suggests that students graduating this year will be competing for around a quarter of the number of vacancies which have been available in the previous two.

However, if you're about to head off to university - or you're there already - don't panic. There are several things you can do to protect yourself, your job prospects and your finances.

If you're about to go to university

Making the right financial choices now can make a big difference in the long run.

         You don't have to be loyal to your childhood bank, so if you're choosing a student bank account, make sure you shop around and compare all the incentives on offer.

         Try and think long-term. £50 cash may come in very handy, but other deals (like a free student railcard or an account with a larger interest-free overdraft) may save you more money in the long run.

            And some incentives just aren't as good as they seem. For example, some banks offer    discounts in certain shops - when your NUS card offers you these deals anyway.

         When you take out a student account, you may also be offered a credit card for the first time. This may be a pretty exciting prospect - just try not to go nuts and run up a huge credit card bill which you then spend years trying to pay off.

If you're currently a student

         Consider getting a holiday job, and maybe even something part-time during term. You'll probably still need to take out a student loan, but if you're working, you may not need the full amount.

         You may want to take out the maximum loan you're entitled to, then invest what you don't need in a high-interest savings account. As long as you're disciplined and don't end up dipping into it, this should create a nice little rainy-day nest egg.

         Whatever student loan you end up with, just don't spend it all at once! Instead draw up a budget, then try and stick to it.

            It sounds boring, but it could save you thousands in the long run. And you also won't          have to make `value' tins of beans last for days as the end of each term approaches!

         Try and think about your job prospects fairly early on - not just at the end of your third year. Work experience in your chosen field will mean you're ahead of the game when the race for graduate jobs comes round.

If you're just about to graduate

         If you're unsure of what career to choose, have a look at my colleague Jane Baker's recent article, 7 Ways To Recession-Proof Your Job.

            It outlines the top ten `recession-proof' jobs in the UK - and gives lots of useful advice on   how to make the most of a job once you've got it.

         Now is also the time of get a grip on the debts you've built up as a student.

            Your student loan is likely to be there for the long-term - but organise any other debts to    make sure you're paying as little interest as possible.

            For example, if you're paying interest on your credit card, transferring the balance to a     0% balance transfer card could save you a packet.

         And finally, if you need to take out a graduate loan, don't feel pressurised into buying hugely overpriced payment protection insurance.

For plenty more advice for students, have a look at A Foolish Guide To Student Finance - and good luck!