Take a lesson in finance before you leave for university - Conal Gregory

University of York
University of York
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Banks realise that once a student is signed up, they are likely to stay loyal to them for life. This is why banks put so much effort into attracting the student community, many of whom will be the high fliers and top earners of the future.

If going off to university, do not delay in setting up a current account and putting other money plans like contents insurance in place. It is far better to make the arrangements in advance.

Money is the number one concern for today’s students, even over and above exam stress, according to research by Barclays. Yet students are more financially savvy with most having a savings account and many an ISA.

Most students depend on a loan to fund tuition fees, maintenance and travel. Tuition loans are available to everyone but personal circumstances dictate the size of the maintenance loan which in England works out at £8,944 if the household earns £25,000pa or less, falling to £4,168 where the parental income is above £62,212pa.

Students going to a university in London can borrow up to £11,672. Maintenance grants – that do not have to be repaid – are available if studying abroad as well as for those studying dentistry and medicine when on clinical placement.

The loan is unlikely to be sufficient. Half of all students relied on parental help and 36 per cent earned in the summer vacations, according to a Which? survey.

The annual National Student Money Survey revealed that on average, parents gave £1,608 last year – down from £1,656 in 2017 – although there was a five per cent increase in living costs to £9,684 of which rent at £5,172 was the major part.

Do not overlook bursaries and scholarships. Some charities and trusts specify particular subjects whilst a number aim to help applicants from certain regions. The Scholarship Hub is a useful database.

Make as detailed a budget as possible before going to college. Whilst costs vary, Which? provides a helpful typical monthly breakdown of £231:

£67 groceries

£45 utilities

£83 transport

£36 activities and hobbies.

Use apps to find offers which range from clothing and technology to food and drink. They include Student Beans and Unidays to gain discounts at restaurants.

Rebates can be earned in store and online with Cashback and Quidco.

There has been much adverse and often ill-informed comment about student loans.

Currently, no part has to be repaid upon graduation until over £26,575pa is earned and, if not repaid after 30 years, the balance is written off. Often a first or second employer will offer to clear the loan as an inducement to join.

Maintenance fees are split into three instalments and paid at the start of each term.

If renting privately, the landlord or agents cannot charge for a reference check or for preparing a contract.

Have the security deposit ready which is up to five weeks’ rent in England and two months in Scotland. Check the deposit is paid into one of the designated protection schemes, such as the Deposit Protection Scheme.

In a hall of residence, the rent and such costs as electricity and gas will be sorted out but when renting with others outside, decide who will be responsible for utility costs including water but also broadband.

If living with other full-time students, there is no council tax liability.

To avoid potential disagreements on utility and other central costs incurred, agree how they are to be split and consider opening an account to fund them.

Online invoicing is likely to bring savings. Do not forget to take meter readings and inform the providers immediately you move in so that you are not paying for any use made by former tenants.

A personal bank (or building society) account is essential. If you already hold one, switch to the student version but consider the competition.

Whilst the gifts on opening can be useful, the overdraft facility is likely to be the key decision maker.

The UK’s largest bank, HSBC, gives £100 cash plus one year’s British Cycling Fan membership whilst NatWest/Royal Bank of Scotland provide a choice of either complimentary Amazon Prime student membership with £10 gift card, National Express Coachcard or tastecard. Spanish bank Santander gives a four year rail card which cuts one-third off journey costs.

With overdrafts, check the fee-free limit. Take great care not to breach that and, if it ever becomes likely, contact the bank or society in advance.

An arranged overdraft is likely to incur far lower interest and nil or low arrangement fees.

“It is important that students keep in mind that overdrafts are not guaranteed and it’s vital they use any limit sparingly as overdrafts are a loan and will need to be paid back eventually,” warns Rachel Springall from the data analysts Moneyfacts.

As a warning, do not succumb to so-called student loans offered by private firms.

They are commercial borrowings offered on unfriendly terms. TFLI, for instance, is a credit broker which trades as Light Finance with quotes ranging from 9.9 to 1,698.1 per cent APR whilst Irish-registered Future Finance lends with rates up to 30 per cent APR.

Smart-Pig has up to 1,121 per cent APR but borrowers are not charged more than 50 per cent of the loan value.

Free overdrafts are available up to £1,000 with Halifax and Nationwide (rising to £2,000 in the second year and £3,000 in third year) and £1,500 with Halifax, Lloyds and Santander. Bank of Scotland allows £500 initially, £1,000 after six months and £1,500 after nine months followed by £1,500 in the second and third years.

Barclays has a scale of fee-free arranged overdrafts with £500 on opening and then £1,000, rising to £2,000 in the second year and £3,000 in the third, subject to application, status and lending criteria.

In the first year, NatWest and Royal Bank of Scotland are the most generous, offering up to £2,000 and same sum in second and subsequent years. TSB permits up to £1,510 each year.

Few give interest on current accounts but TSB pays five per cent whilst Santander pays on a sliding scale: one per cent on £100 balance, two per cent on £200 and three per cent up to £2,000.

Nationwide pays one per cent and, like HSBC, also offers preferential savings rates. Halifax pays just 0.1 per cent.

Barclays offers up to 10 per cent cashback which can be earned at leading retailers plus access to free e-textbooks via a one year subscription to Campus Books, saving over £100 on textbooks.

Lloyds and Bank of Scotland give a TOTEM card which brings high street discounts.

Finally, a parent or guardian could recoup some of their financial support by either buying student accommodation or investing in a company which specialises in such provision, such as Unite.

Founded in 1991, it is now the 132nd most capitalised company on the stock market. After acquiring Liberty Living, it will have 73,000 beds in 27 towns and cities.