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Safe student spending

School leavers may be excited about the freedom of the rapidly approaching university years, but how many are prepared for the more mundane financial aspects of leaving home? Being a student is usually the first time you will have to think about household bills, paying for shopping and funding everything in your day to day living yourself. Here are some simple guidelines to not only surviving student financial life, but hopefully to help you thrive too.

Before university

Saving some money by finding summer or part-time work during your sixth form or gap years can help boost your finances and get you off to a good start, especially if you find a savings account with a high rate of interest. The more you save before you go to university, the more you’ll have to spend once you’re there!

Be aware that your student loan may not be the only financial help available to you. The Bursary Aware map at http://bursarymap.direct.gov.uk/ gives details of all bursaries available from universities and higher education institutions in England, and the Aim Higher site at www.aimhigher. ac.uk lists many other sources of financial support available. Finally, www.ucas.com/ students/studentfinance/ has a lot of useful information about student finances.

Budget basics

Student loans only go so far, so it is important not to use them frivolously as you could find yourself struggling to pay for necessary basics by the end of term. Drawing up a budget will help you highlight the hidden costs of living like laundry or library charges as well as the more obvious rent, food and books.

Making budgeting a key aspect of your university life will help you to afford your socialising as well as the essentials. Finally, a good way to ensure you don’t overspend is to use your willpower! Take out your weekly allowance at the start of the week in cash and then make sure you don’t return to the cash machine until the beginning of the following week. It sounds simple, but you may find it actually needs a surprising amount of discipline to avoid taking out more one week and promising yourself you will take out less the next - which in practice will probably never happen.

Budget specifics

ADD up how much money you have coming in each month from your loan and other sources such as a job, parental assistance, bursaries or grants.

SUBTRACT from your income any fixed regular outgoings to obtain the amount you have left: things like accommodation, internet, travel, tv license, phone contract, and gas or electric bills if applicable. You may need to estimate the latter, and if so, it is better to over-estimate than underestimate.

DIVIDE this by the number of weeks per term/year. Now do the same with your university savings, and add the figures together to obtain the maximum amount you have left to spend per week.

SPEND an hour or two each week working out exactly where your cash is going. Keep the receipts of all your purchases for a week or two once term has got going to help you do this. If you find you are spending too much on any one luxury item (drink, coffees, magazines, etc.) try and cut back.

SAVE a contingency amount each week for future events you may wish to go to. There may also be occasions on which you unexpectedly have to spend a large amount of money (sports equipment, birthdays, fines, trips, books, etc.) so having a reserve fund in place will help avoid panic borrowing.

Choose your bank

The chances are that you will be with the bank you use as a student for at least three years, so give yourself time to think carefully before signing up for an account. Find out if there are there branches near to your campus, and how much support Life Stages School leavers may be excited about the freedom of the rapidly approaching university years, but how many are prepared for the more mundane financial aspects of leaving home?

Being a student is usually the first time you will have to think about household bills, paying for shopping and funding everything in your day to day living yourself. Here are some simple guidelines to not only surviving student financial life, but hopefully to help you thrive too. Safe Student Spending! there is for students in them. If the account offers an interest-free overdraft, ask how much you will be charged if you go over your limit, and, once a graduate, how long you will have to repay the free overdraft before they charge you interest.

Student overdrafts

Most of the big banks will offer an interestfree overdraft facility on their student accounts. The amount will depend on the bank but a good benchmark is around £2,000 interest-free.

Although the overdraft will not cost you anything if you stay within your limit, go beyond it and you’ll be charged a hefty interest rate on the difference and usually a one-off unauthorised overdraft fee too.

As for repaying it, there is usually no specific time limit. But after leaving university, the interest-free perk will vanish and you will be charged the same rates that apply to overdrafts on standard current accounts - some of which can be quite alarming. This article has been included for general interest purposes only and we are unable to provide specific advice in some of these matters.

The UK’s largest survey of student finance reveals that students who started at university in 2008 can expect to owe nearly £21,200 by the time they leave and new students should reckon on at least £2,000 more than that.

But by taking your money responsibilities seriously from the start, you can help yourself avoid accumulating huge debts by the time you graduate.

Credit cards

Credit cards rarely carry privileged terms for students, and if there is any way you can get through university without one, do it. At the time of writing, NatWest, for example, charge 18.9% APR (variable) on their student credit card, with a monthly minimum payment being the greater of 2.25% of your balance (rounded down to the nearest pound) or £5.

At the maximum credit limit of £500 and sticking to the minimum monthly repayment of 2.25%, you will be paying it off for 189 months - just under 16 years - at a total cost of £1,254.89, having long forgotten what you spent the £500 on in the first place.

Insure your stuff

Research from Sainsbury’s Home Insurance reveals that the typical undergraduate each has an average of £3,548 worth of belongings in their student accommodation including iPods, DVD players, computers, games consoles and mobiles.

Whether you are living in a hall of residence, private rented or shared accommodation, insuring your personal possessions against theft or damage is a necessity and you should ensure that they are covered from the moment you arrive. Your possessions away from home may be covered under your parents’ household insurance but you will probably need to notify them first. Some things to check are:

• The exact level of cover provided.
• Excess amounts.
• The insurer’s stance on internal door locks and theft from communal areas.
• The terms and conditions for cover during holiday periods.

Be aware that their policy may not give the type of cover you need, in which case additional advice is needed. We can offer you advice on general insurance policies to give you peace of mind that should the worst happen to your possessions, you have the correct amount and type of insurance to deal with it. Being prepared for the financial realities of university life can make the difference between a satisfying experience and one fraught with money worries.

This article was taken from Seneca Reid's Spring 2010 newsletter.

Seneca Reid is a trade name of Andrew Charles Reid Smith who is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Services Authority.

The information on this website is for the use of residents of the United Kingdom only. No representations are made as to whether the information is applicable or available in any other country which may have access to it.

Openwork Limited offers insurance and investment advice on products from a limited number of product providers and advice on mortgages representative of the whole market.