5 mistakes you cannot afford to make as a student and 5 things you should do


Thousands of students heading off to university this month will find themselves in charge of their own finances for the first time. It can be a daunting experience with a seemingly endless to-do list of chores and items to buy.

When it comes to finance there are a number of mistakes that students just cannot afford to make. James Daley, of consumer campaign group Fairer Finance, says: ‘Going to university is often people’s first step into a full independent adult life – and there is a lot to get to grips with.

‘But if you start good financial habits at university, you will carry those through into the rest of your life.’

Victim: Design student Charlie Turner has had items stolen or damaged three times

Victim: Design student Charlie Turner has had items stolen or damaged three times

Victim: Design student Charlie Turner has had items stolen or damaged three times

 Not getting a bank account

Banks know that once you open an account with them you are more likely to switch your life partner than your current account, so they make sure to offer great deals to students.

It is definitely worth taking out a specific student account as they come with benefits that most general bank accounts do not have.

Students can often enjoy an interest-free overdraft as well as potentially picking up perks such as a free National Union of Students card or railcard.

Charlotte Nelson is finance expert at financial data scrutineer Moneyfacts. She says: ‘A decent current account is a vital piece of a student’s financial survival kit. Most students will spend a good portion of their university days using their overdraft, so finding an account with a good interest-free overdraft facility is important.’

It is crucial to look at all of the terms and conditions when you are choosing an account and not just be swayed by the best freebies.

The biggest interest-free overdraft currently available to first-time students is £2,000. Both NatWest and Royal Bank of Scotland offer overdrafts up to this amount along with a free National Express young person’s coach card.

For those students who may be doing significant travelling, Santander offers a free railcard along with a £1,500 interest-free overdraft. HSBC has a smaller overdraft of £1,000 but offers an £80 voucher for online retailer Amazon along with a 12-month Amazon Prime Student subscription. For students planning to try to save some money, TSB (a tarnished brand) offers interest of up to five per cent on a maximum savings balance of £500. This is in addition to a free overdraft of £1,510.

Nelson adds: ‘If you prefer to do banking in a branch then it may be wise to check which banks have facilities on campus before you choose.’

Forgetting about funding

With latest figures estimating that students may soon be graduating with £50,000 of debt, it makes sense to find out if you are eligible for any financial help. Many students qualify for a scholarship, grant or bursary which can help mitigate costs.

Talented musicians who are happy to perform at events while they are at university, for example, could be eligible for a musical scholarship even if they are not studying the subject.

The same is true for students who have outstanding achievements in sport and are willing to compete for their university. Other bursaries are based on factors such as where you live or what your parents do for a living. Students can find out more about potential funding opportunities on their university website. Also look at website The Scholarship Hub.

Getting the wrong job 

Many students will get a part-time job for some extra money while they are studying. But each year some will fall prey to a dangerous scam.

Students are often used as ‘money mules’ by fraudsters who want to move illicit funds from one account to another. Students are transferred a sum of money from one account and then told to move it to another, keeping a portion for themselves for acting as a mule.

It sounds simple but this is money laundering and it can lead to a criminal sentence of up to 14 years in prison.

Katy Worobec is head of fraud at banking association UK Finance. She says: ‘You should be suspicious of any job which asks you to receive money into your bank account. Ignorance is no defence – as a money mule, you will be the easiest link in the chain to track down.’

Fraudsters often pose as legitimate employers, advertising jobs with titles such as ‘money transfer agent’.

Be wary of unsolicited offers and always do some background research on any company before agreeing to work for them.  

Damaging your credit score

Getting a black mark against your name because of a missed payment on a bill or exceeding an authorised overdraft facility could adversely impact your finances for years to come.

There are a few things students can do to minimise the chance of damaging their credit score.

Make sure you set up a direct debit for any bills in your name. This means they are paid automatically so you do not have to remember each month. If you are living in shared accommodation and splitting household bills, make sure everyone in the house makes their contributions in good time so you are not penalised if a payment is late. With a sizeable student loan and an overdraft, young people should not be drawn into taking out credit cards or short-term loans to get some extra cash.

Interest rates on credit cards and payday loans can be eye-wateringly expensive and students can easily find themselves in a cycle of debt where they have to borrow more just to meet the repayments on the loan they already have.

Try to make a budget and spread spending over the year. If you do run into trouble speak to your bank.  

Not taking out insurance

One in four students will find themselves the victim of theft at some point during their time at university.

Research by insurer Direct Line indicates that some £25 million of goods have been stolen from students in the past three years with the most common items taken being laptops, mobile phones and bicycles.

Students can make sure their contents are covered without even spending a penny.

Most young people will find their parents’ home insurance cover will extend to them while they are living away – as long as they inform the insurer.

It is something 21-year-old Charlie Turner wishes he had known. The industrial design student, currently on a placement year from Loughborough University, has had items stolen or damaged three times in the past two years.

While living in student halls in his first year his £500 bicycle was stolen from the bike rack outside his accommodation block.

In his second year, Charlie had to fork out hundreds of pounds after a friend stepped on his laptop and broke the screen.

He then came back to his digs after the Christmas break last winter to find the house he shares with five friends had been broken into. Around £600 of Charlie’s belongings including a PlayStation 4 had been taken.

Charlie says: ‘Insurance is something that has always been at the bottom of my to-do list because you never think anything is going to happen to you. It is an area of finance I lack any knowledge of.

‘I do not understand what is and what is not covered by a policy and I did not know I might be covered by my parents’ insurance. I have not told them about the burglary.’

And five things you should do

  1. Take advantage of discounts and freebies. National Union of Students ‘extra’ cards can get you money off in shops and restaurants while a Railcard can save you up to a third on your train fare. Meanwhile, if you live in a student-only house, you can save on council tax.
  2. Set a budget – and stick to it. When your first student loan instalment lands in your bank account it can be tempting to spend it all at once. Set an amount aside each week to spend and stick to it – withdraw it in cash and leave your debit card at home if that helps.
  3. Shop around – whether it is for your food shopping, mobile phone or bank account.
  4. Learn how to cook – it is cheaper (and more nutritious) than living off ready-meals.
  5. Ensure you do not pay too much tax. If you earn less than £11,850 over the course of the tax year (April 6 to April 5) you do not have to pay tax – so be sure to contact HM Revenue & Customs for any refund of tax paid.

 

 

 



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