8 essential money tips for students

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The Independent Online

Being financially savvy as a student is crucial if you're to avoid a horrible debt hangover when your course comes to an end. Here are eight things every young person should know about money before heading off into higher education.

1. All debt is not the same

If you're about to embark upon university life, it's likely you’ll be borrowing substantial sums from the Student Loans Company (SLC) over the next three or four years.

No doubt this seems a daunting prospect, especially as recent research from Push - the "ruthlessly independent university guide" - suggests students starting degrees this autumn can expect to graduate with debts of £23,000 each.

However, it is important to be aware that not all forms of borrowing are the same. Many young people, in a bid to remain relaxed about borrowing money, conflate SLC debt and commercial debt.

Although the idea of owing the SLC thousands of pounds may seem scary, remain calm and remember: you will not be required to pay your loan back until you are earning at least £15,000 per year. On the other hand, bank overdrafts and credit card debts can be expensive ways to borrow - and are repayable in line with lenders' own terms and conditions.

2. 0% overdrafts don't last forever

Most student bank accounts come with an interest free overdraft that will last for the duration of your course, and probably for a short period beyond graduation.

However, a 0 per cent debt is not "free money"; it will eventually have to be paid back.

Try to remember throughout your course that the deeper you delve into your overdraft, the more money you will need later to dig yourself out of debt.

3. Not all bank accounts are equal

When it comes to choosing a student bank account, make sure you compare a variety of options.

Finding a large interest free overdraft is the priority for many students - so right now Halifax and Bank of Scotland's deals are very popular, even though no one is guaranteed the full £3,000 overdraft the institutions say they might offer.

If you know you’ll require a comparatively small overdraft, it may be worth considering an account that comes with a useful freebie instead. Nat West is offering student customers a free five-year 16-25 railcard, worth £120, which will slice a third off most UK train fares.

4. Credit cards must be handled with care

Many banks now offer credit cards as optional "extras" for students - and there are good reasons for taking one out.

Credit cards can be useful in emergency situations, and using one for purchases that cost more than £100 will give you enhanced protection against faulty goods under Section 75 of the Consumer Credit Act.

However, the APRs attached to student credit cards tend to be higher than average and, even though the credit limits available are usually low, getting into debt on a student credit card can be very expensive.

This is particularly true if you can only afford to repay the minimum amount required by your lender each month (typically 2 per cent of the card's total balance, or £5). In this situation, a student who owed £500 on a credit card charging 18.9 per cent APR from the first week of term would pay out £250 in interest during a three year course, yet would only reduce their debt by £92!

5. A budget is absolutely essential

If you head off to university without a budget, you could face serious financial fallout before your first term is over.

Sit down before you go and work out a realistic budget that takes into account your income, plus your spending on everything from accommodation to nights out. Sticking to your plan will mean you don't run out of money unexpectedly.

6. You should insure your stuff

Many young people start university mistakenly believing their parents' home insurance policy will protect their possessions. It is crucial that you check in advance whether your belongings would be covered in the event they were stolen or destroyed while on campus.

If your parents' policy does not, or will not, cover your stuff while you're away, it is well worth purchasing specialist student insurance.

This type of cover is usually quite cheap, whereas it could prove costly to replace lost or damaged items later.

7. Shopping around could save you a fortune

Whether it's DVDs, books or gas and electricity you need to buy, shopping around could save you serious money during your student years.

Get into the habit of using price comparison websites like BeatThatQuote.com and shopbots such as Find-dvd.co.uk and Find-book.co.uk . Make sure you never pay more for anything than you need to.

8. Discounts and deals are your friend

Likewise, ensure you take advantage of the regular discounts and deals available on everything from dinners out and cinema tickets to food shopping.

Sign up with websites that such as MyVoucherCodes.co.uk and HotUKDeals.com, and use discount codes, click-and-print vouchers and special offers to cut the cost of everything you can.

Laura Starkey is from BeatThatQuote.com