Give your student costs a checkup

Published on Saturday 27 September 2008 17:09

WITH Freshers' Week over, students studying in Scotland now need to settle down into university life. But as well as concentrating on their studies they will need to pay attention to their finances if they want to avoid graduating with a degree in debt.

Research from the Financial Services Authority (FSA) revealed that one in three students never checks bank statements and two in five admit to being disorganised where money is concerned, despite one in three being permanently overdrawn.

So the watchdog has launched its Money Doctors project to help students in higher education become financially competent, encouraging them to confront debt and to take control of their own finances before they get into difficulties.

So far, the FSA has helped train 100 student money advisers at 50 universities across the UK and hopes to double that number in 2008/09.

Students can hardly be blamed for being bewildered by it all. The way the combined loans and bursary system works in Scotland is complicated. For Scottish students who go to a Scottish university or college, the Student Awards Agency for Scotland will pay tuition fees, generally worth 1,775 a year.

In addition, for students living away from home, there is a combination of means-tested loans and bursaries available up to a maximum of 4,510 a year.

But getting a degree has never been more expensive, so it'll pay you to take lessons in money management.

Student bank accounts

The good news is that competition is fierce between banks keen to get students' business. All the main high street banks offer accounts specifically for people in further education. These are just like normal current accounts, but with different terms and conditions.

Banks tend to offer a certain size interest-free overdraft as well as a selection of perks or benefits for students.

RBS, for example, is offering a choice of benefits to those opening a Student Royalties Account. Students in Scotland can choose 100 cash or a travel package of a three-year 16-25 Railcard, plus four weeks' free bus travel in Edinburgh, Glasgow or Aberdeen (worth up to 38).

The bank also offers interest-free overdrafts up to 2,750 and account-holders get money off selected CDs, books, theatre tickets and holidays.

However, experts warn students not to get lured in by freebies. Kevin Mountford, head of current accounts at price comparison site moneysupermarket.com, says: "Banks have always been keen to catch people at an early age because over a quarter of people stick with the one bank throughout their working life.

"The industry uses teasers to draw in students, however these can often detract from the core features. In a lot of cases, the overdraft element will prove to be far more relevant for students.

"In general, overdraft limits are increased year by year, although the latest Halifax/Bank of Scotland account can offer up to 3,000 from day one. Students need to remember the golden rule though – that overdrafts will need to be paid back at some stage."

Budgeting

If studying away from home, accommodation is likely to be your biggest expense, whether you live in halls of residence or privately rented property.

It can be easy to let your spending run away with you. The odd 20 or 30 here and there can soon mount up. Remember: your overdraft limit is not bottomless and will also need to cover your bills.

This may be the first time you will need to manage household bills, and the easiest way is to write out a budget plan. Take into account all guaranteed income, and set this against your bills. Once you know exactly what your living costs are you, will know how much 'fun' money you have.

Your bills will include gas and electricity and water although these will probably be included if you live in halls.

Also, every student watching television at university – including on a PC or laptop – needs to be covered by a valid TV licence. If you've signed a joint tenancy agreement with your housemates, you'll only need one TV licence to cover all the TVs in your house.

However, each room in a hall of residence is treated as a separately occupied place so you'll need a licence of your own.

Most banks will offer you a student credit card, with a typical limit of around 500. But treat it with caution.

While the limits may be small, with no regular income even a few hundred pounds can be a struggle to repay, especially when the interest rates tend to be higher than average.

If you do choose to take a credit card, use it to get the most competitive deals online, when travelling or in case of emergency – but try not to use it for everyday spending.

Insurance

According to the Home Office, students are one of the groups most likely to become victims of crime, yet many students don't bother to insure their belongings, often because they think it's too expensive.

In reality, student insurance can be cheap, costing as little as 33 per year, which, when you consider how many high value items – such as mobile phones, iPods and laptops – you're likely to have knocking around is good value for most people.

Specialist student insurer Endsleigh is the only insurance company endorsed by the National Union of Students and as such can be seen as the most student-friendly, but other providers offer competitive rates for students too.

It's worth checking to see if your parents' insurance policy will cover your belongings while you're a student. If it does, remember to check the small print; you might find the cover is limited up to a certain amount or that possessions aren't covered during vacations.

To keep possessions secure, insurer More Than recommends making sure the property has good security measures in place such as lockable windows, mortice locks, and, where possible, a fully functional alarm system.

Marking expensive items such as laptops and iPods with a UV marker recording name, student ID number or parents' postcode is also a good idea.

'I'm preparing for bills to go up this year'

STUDENT Emma Robertson, 20, says she chose the Royal Bank of Scotland's student account as it offered a straightforward cash bonus of 100.

"Most banks offer an interest-free overdraft but what happens when you graduate? RBS has a good graduate account that will allow me to carry on the overdraft if I need to," she says.

Emma, who has just started the third year of her Physics degree at St Andrews University, lived in halls during her first year at university but has lived in a shared flat for the past two years. She arranged her contents insurance through Endsleigh.

She says: "I compared prices on the internet and Endsleigh came out of the cheapest. They also provide cover for my laptop."

To prevent herself from getting in too much debt Emma works about 12 hours a week in a restaurant during term time and also worked as an intern at RBS over the summer holidays, which enabled her to save some money.

She says: "During my first year in halls bills were included but since then I have had to budget for them. They haven't been too bad but I think they will go up this year. I used to spend about 25 a week on food but I think it will be more this year as prices have gone up."