Students need a degree of financial wisdom to pick most comfortable location for college life

Published on Saturday 11 August 2007 00:34

SCHOOL leavers across Scotland this week received their exam results and, for many, attention will now focus on the start of their first term at college or university.

The reality is, money must come into the equation at some point, alongside academic ambition, widening horizons and everything else that goes with higher education.

Many potential students and their families may not realise the cost of university can vary greatly between establishments, considering such factors as average rent, how much part-time jobs pay and the likely cost of a night out.

Royal Bank of Scotland's (RBS) student living index for 2007 makes interesting reading, as it ranks the country's major university towns by cost of living.

It reveals Scottish students spend 925 million a year on university living costs, but opting for Dundee could be a sensible economic choice. At the other end of the scale, Edinburgh is the least cost-effective.

During one academic year, a student at Dundee will be, on average, 1,126 - or 1,400 single track music downloads - better off than their peers in Edinburgh.

The RBS survey - now in its fourth year - combines and analyses weekly expenditure data for rent and a selection of essential and non-essential items, together with weekly earnings figures from part-time work.

It found Dundee offered "a winning combination of relatively inexpensive living costs together with the highest weekly earnings from part-time work in Scotland".

Each Dundee student spends an average of 134 a week on living and housing costs, but earns 113 from part-time work. An Aberdeen-based student spends a much higher 201 a week and earns only 66.60.

Dundee has climbed from third place in 2006 thanks to a significant rise in average weekly earnings and a fall in average rental prices from 80 to 73 per week.

Each year, Scottish students spend 376 million on rent; 104m on supermarket food; 62m on going out; 27m on books and course materials and 19m on CDs and other music.

Katie Cassidy, head of student banking at RBS, said: "Our research shows that many students are taking a positive, proactive approach to managing finances by taking on part-time work. However, it is still a significant cause for concern that 42 per cent of Scottish students underestimate the amount they need to spend on rent and living costs, despite some planning and budgeting. A further one in five doesn't even get as far as planning and budgeting.

"The crucial element in managing finances effectively while studying is careful budgeting. While it might be tempting to take the 'ostrich approach' and bury your head in the sand, it's better to avoid problems in the first place by taking a careful look at potential incomings versus outgoings."

The main banks are continuing to roll out their student accounts for the forthcoming academic year. For example, Clydesdale Bank this week launched its account which it says will help with money management and entertainment costs.

The current account comes with a 1,000 overdraft facility, to help cash flow between student loan instalments and an interest rate of 3.3 per cent on credit balances.

It is also providing account holders with a cinema card that enables them and their friends to see the latest movies at half price for a full year.

Steve Reid, general manager retail, Clydesdale Bank, said: "Entertainment is still one of the greatest expenditures in a student's life, accounting for 20.4 per cent of total cost, which is why we decided to look at ways in which we could offer practical help to make sure it's not all work and no play."

But students should be wary of taking-up credit cards offers, as this can be a sure-fire way of getting into high-interest debt.

Amer Sajed, managing director UK Cards at Barclaycard, said: "Cards can be a lifeline for students managing a tight budget. They can help make the most of your time at university and establish a credit record for the future, but only if they are used sensibly."

NEW PLAYER

WHEN students have gained their degrees, started working and feel their debts are under control, there are a number of lenders that offer mortgages tailored to their needs.

For example, Dunfermline Building Society offers a range of graduate and professional mortgages.

Simon Cocker, the head of business development at Dunfermline BS, said: "Our research shows that the market for higher loan-to-value products with graduates and professionals will double over the next five years.

"Certainly, with the pace of high price increases showing little sign of abating, particularly in the price ranges where professionals typically are buying, we feel our entry in this market will provide them with more choice and value."

The products allow up to 110 per cent LTV for professionals and 105 per cent LTV for graduates.