Whether you're already an undergraduate or you'll be a fresher this autumn, these tips will help you to get a Masters degree in Money!
Almost 400,000 students started university in 2006 and this year's intake is expected to rise a further 6% to an all-time high. However, the cost of pursuing a degree course is rising at a rapid rate.
Using figures from the National Union of Students (NUS), I've found that, during a three-year course, a typical student can expect to spend between £39,000 and £45,000, of which £9,000 will be tuition fees. Indeed, the NUS estimates that a typical undergraduate entering university this year could graduate in 2010 carrying a debt burden of around £30,000. Ouch!
Although much of this load will be made up of low-interest loans from the Student Loans Company (SLC), many students will build up debts in the form of overdrafts and credit-card borrowing. So, without further ado, here are ten tips aimed at boosting student finances, courtesy of Fool.co.uk and our partner, financial researcher Moneyfacts:
1. Don't be duped by account incentives
Eleven different providers offer current accounts designed specifically for students, but the attractiveness of these accounts varies widely.
Our first warning is not to choose an account based on the freebies, gimmicks or giveaways on offer. A free MP3 player or cinema tickets may sound great, but you're better off focusing on the size of interest-free overdraft on offer. Then again, the free railcard offered by NatWest could save you a fortune on fares.
It's worth pointing out that Lloyds TSB offers a £75 cash incentive to new student account holders, but £50 of this is paid only if you do not go overdrawn and pay in three credits to your account by 30/06/08. It will be hard for many students to avoid going into the red, so most will get the basic £25 instead of the full £75. Pay attention to the small print!
2. Choose the best student account
Although minted students should check the credit interest rates on offer, for most undergraduates, the size of the interest-free overdraft is the deciding factor.
Halifax offers the highest overdraft limit, with up to £2,750 available from year one onwards. However, if there isn't a Halifax branch near your campus, read The Five Top Student Accounts for alternatives.
3. Try to save this summer
Although it's tempting to live it up in a long, hedonistic honeymoon between leaving school and going to uni, sharp students will use this break to earn a few readies.
This is an ideal time of your life to get the savings habit, so do try to stash some of your cash in a high-interest savings account or tax-free cash ISA (Individual Savings Account). Aim for an interest rate of at least 6% a year before tax. A little effort now could avoid a lot of financial pain later!
4. Learn to budget
Although all but a privileged few students will run up debts during their years of study, it's a good idea to avoid constant over-spending.
When my finances became hopelessly fouled up during my uni years, I took to writing down every penny I spent in a little red notebook. If you don't want to end up living hand to mouth as I did, be sure to draw up a budget which lists all of your income and expenses. After subtracting your everyday living costs, you can then decide how much 'play' money you have to splurge in the SU bar.
5. Spend your student loan carefully
If you don't want to end up begging at the feet of the strict loan officers of the 'Bank of Mum and Dad', then try not to blow your student loan in the first few weeks. Remember, this is your first real stab at living independently, so don't blow your SLC money in fresher's week. Try to stretch it out over as much of the semester as you can. Also, don't fret too much about SLC debts, as you don't have to start repaying them until you earn over £15,000 a year, and the interest rate is lower than almost every other method of borrowing.
6. Be cautious with credit cards
One thing I bitterly regret was being enticed into taking out a Visa card and an Access card (the former name for MasterCard) while a student. Alas, I saw my credit limits as targets, and blew thousands of pounds in credit card-fuelled spending sprees. Of course, it was a case of 'buy now, pain later', as I went on to pay thousands of pounds in interest and late-payment charges. D'oh!
For the record, a typical credit card charges an annual interest rate of around 16.5% APR. At this rate, your debt will double every 4½ years thanks to interest alone. So, although credit cards can be very convenient budgeting tools, they can be lethal in the wrong hands.
To learn the rules of the plastic game, read Your Ultimate Guide To Credit Cards -- and try not to spend what you don't have!
7. Check your bank balance often
Problems always arise when you lose track of your spending, usually in the form of fines for exceeding your overdraft limit. So, keep a close eye on your bank account. The easiest way to do this is to use online banking. However, take great care when using shared computers; make sure that you log off when you've finished viewing your account, and read point nine below about financial fraud.
8. Don't become a financial ostrich*
If you're in financial difficulty, please don't be afraid to ask for help. Speak to your bank's student advisor or the welfare officer at your Students' Union. Burying your head in the sand will only make things worse, and student advisers are used to dealing with financial hardship. In particular, talk to your bank if you are nearing your overdraft limit, in order to avoid unwanted penalty charges and black marks on your credit record.
9. Watch out for fraud
Thanks to the huge growth in Internet use, millions of criminals are waiting to fleece you of your cash. If you want to be safe then you must take steps to protect your money and your identity. Never allow other people to use your plastic cards and PINs, and be sure to safeguard or destroy your receipts and bank statements. A shredder is very handy. For more advice on dodging financial fraud, read Ten Tips To Prevent Financial Chaos.
10. Make sure your possessions are properly insured
Specialist possessions insurance is available for students living in halls or shared accommodation, notably from Endsleigh insurance. You should ensure that your policy provides sufficient cover for your room contents, valuables and other possessions, including your bike if you keep it on campus.
That's it from me. Enjoy your time at university, but try to learn some lessons about money while you're there!
* Amusingly, it's a myth that ostriches bury their heads in the sand. In the largest study of ostriches, conducted over a twenty-year period, not one head-sand-burying incident was recorded!
A Monster Guide To Student Finances | Teaching Young People About Money.