You’ll probably end up in the red… but be clever and ease the financial pain.
Nerves will be jangling this week as hundreds of thousands of students prepare to collect their A-level results on Thursday.
For those who make the grade, university places await. But going away to study also means financial independence, with many young people managing a budget and paying bills for the first time.
So if you are about to get an account or buy insurance, read our vital guide on student finances to make sure you get the best deals.
Solid support: Tilly Parke's bank, HSBC, helps graduates until they are on their feet BANK ACCOUNTSAs most students spend university life in the red, getting a bank account with a generous overdraft is a priority, so it’s worth finding out which bank can give you the most generous interest-free borrowing.
Halifax and HSBC offer the biggest interest and fee-free overdraft for students in their first year at up to £3,000. Overdrafts are agreed only after credit scoring and the full amount may not be given. Most other providers, including Co-operative, Lloyds TSB, Royal Bank of Scotland/NatWest and Santander, offer a tiered overdraft, with the level of interest-free borrowing increasing each year.
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Sylvia Waycot at Moneyfacts, which compiles data on the best accounts, says: ‘Inevitably, many students will exceed their interest-free overdraft limit, so check the charges applied on extra authorised borrowing. Rates can vary widely.’
Also be wary of unauthorised borrowing charges, which can be steep at up to 24 per cent. These will hit those students who are struggling financially and finding it difficult to keep within their agreed borrowing limit. Always speak to your bank if you are worried you may go over your authorised overdraft. It may be possible to extend the limit for a short time.
Some student accounts offer incentives. This year these range from a £50 cashback for new customers and discounted car breakdown cover to shopping and travel discounts. But Waycot warns students to look beyond these perks.
‘Incentives should be viewed as a bonus, not the reason for opening an account,’ she says. ‘The overdraft deal will be far more crucial during a student’s time at university.’
Tilly Parke, 22, of Oxford, chose HSBC’s account for the generous overdraft it offered when she went to Exeter University three years ago to study politics. Last month, she graduated with a 2:1. She says: ‘I knew I would need to use the overdraft facility so I looked for a bank that would help out most. HSBC was always reasonable with me and the borrowing limit was increased each year, which was helpful.’
Tilly has already found a job with a PR agency in central London and says this is the career that she wants to focus on. She is living with her grandparents in Bromley, south-east London, while she settles into her new role.
She says: ‘I still have an overdraft, but HSBC has a policy that it helps graduates until they are on their feet. I’ve been given a year to reduce the overdraft. That is a big relief although it means I have to concentrate on getting my finances in order.’
INSURANCENot all young people will bother with insurance for their personal belongings at university. For many whose parents have comprehensive home contents insurance, including cover away from the home, items such as cameras and laptops will be covered under the parental policy.
Otherwise, students with expensive gadgets should get personal possessions insurance. It is possible to take out a policy even if you live in shared accommodation such as halls of residence or privately rented shared houses.
Raid: Laptops were stolen from Alexandra Voss's student houseSpecialist student insurers include Endsleigh, cover4students.com and E&L Insurance. Banks such as Barclays and HSBC also offer standalone student possessions cover so compare policies and cost before buying. The level of cover, maximum item limits and the excess – the first part of any claim that the policyholder must pay – will vary considerably.
The online comparison website gocompare.com offers cover through Endsleigh. As an example, £3,000 of cover for a first-year student living in private rented accommodation in the Woodhouse area of Leeds, including cover for a laptop worth £500, would cost £86 a year. The excess starts at £25 depending on the claim.
Alexandra Voss, 21, of Thame, Oxfordshire, was glad she had cover after her student house in Loughborough, Leicestershire, where she is studying for a degree in management sciences, was broken into in April.
Alex and her friends had been out for a drink in town and when they returned they found the back door had been kicked in. Laptops, an old mobile phone, iPods, cash, hair straighteners and jewellery were all taken from the girls’ bedrooms.
Alex says: ‘It was horrible to come back and find the house ransacked. We called the police, who filed a crime report and the next morning I called Endsleigh, our insurer.’
The five females living in the house all paid £1 a week each to the landlord for the cover, so the policy for the house effectively cost £260 a year. But it was worth the money.
Alex, who is living in west London while completing a one-year work placement in marketing for a digital printing company, says: ‘We were able to claim on the policy and as I still had the receipt for my laptop I was able to replace it with an identical model.
‘Sadly it was not possible to replace the necklace my parents bought for my 21st birthday. But I received the cash equivalent and I will look for something similar.’
Mentor: Jim Black of Lloyds TSB, left, helps Josh Leslie Cash backing and valuable work experience…just get a sponsor SCHOLARSHIPSWith average tuition fees expected to rise to £8,500 a year in September, growing numbers of students are looking for ways to help with the cost and debt burden of higher education.
Some High Street banks and big accountancy and consulting firms offer scholarship schemes to undergraduates and include big names such as Deloitte, Ernst & Young, KPMG and Lloyds TSB. Applications for some schemes have closed for the 2012-2013 academic year but students can register their interest in applying for next year.
Schemes offer paid work experience and internships to students in the holidays, and some help financially during term time, typically between £1,000 and £1,500 a year.
A report by the Independent Commission on Fees published last week found an 8.8 per cent drop in the number of English students applying to university, with higher fees blamed.
Josh Leslie, 20, who next month begins his third year studying history at Bristol University, has won a place on Lloyds TSB’s Scholars programme. The programme, which began last year, offered places to 30 students at Bristol and Sheffield universities and focuses on students from lower-income families with an annual household income under £25,000.
From this September the scheme has been extended to include University College London, Warwick University, Oxford University and Edinburgh University. About 15 places are offered at each institution. All Lloyds’ scholars get an annual bursary of £1,000, rising to £1,500 in their final year. Additional performance-related payments are made at the end of each academic year.
On top of the financial rewards, scholars are eligible for two paid internships. Josh is currently doing his first internship at Lloyds this summer. He has been working in different departments within the company including legal and marketing.
Josh, of Brockley, south-east London, says: ‘It is great to have this chance to build contacts and experience in the industry. Hopefully it will help my CV to stand out when it comes to applying for jobs after I graduate next year. One of the best aspects of the scheme has been having a mentor within the bank – in my case Jim Black, who is head of internal communications. We meet up once every six weeks to chat about my progress and career plans. That has proved incredibly valuable.’
It’s not just large companies and scholarship schemes that help students. Savings provider Foresters Friendly Society offers discretionary hardship grants to those in further education worth up to £220 a year, to help towards the cost of books and travel. To apply you must have been a saving member with Foresters for at least six months.
