Are you heading off to university this year? If so, there's one thing you need to put at the top of the agenda – your finances! It's a huge milestone, and as well as being the first time you'll live away from home, it's also the first time you'll be in charge of a proper budget, and finding the right bank account will be key to your financial independence.
Most big banks offer accounts that have been specifically designed with students in mind. These will usually come with generous overdrafts – often a must for any student – and various incentives, but make sure you're not blinded by them. As with any account, it's important to do your research to make sure you find one that meets your needs, but unfortunately the market isn't exactly buzzing with offerings.
Many accounts don't seem to have changed much since last year and providers aren't marketing them with gusto either, and the incentives on offer don't seem to be all that tempting. Sylvia Waycot, editor of Moneyfacts.co.uk, isn't overly impressed: "The most popular incentive offered this year is commission-free currency. However, you can get commission-free currency from a number of places, so it is not a real incentive.
"Neither is the discounted insurance, which could be cheaper if you are willing to shop around. A discount in 'selected' shops is only a bargain if you shop in those places already, and is a £30 railcard worth a smaller overdraft limit?"
The solution, then, is to not put the incentives above everything else. You need to do plenty of research and make the basic terms and conditions your key deciding points for your new account, because it's things like overdraft charges that will really have an impact on your ability to successfully manage your finances.
"When deciding which account is going to serve you best, you first need to understand how you intend to spend your interest-free overdraft," says Ms Waycot. "Are you likely to need the full £3,000 from year one, or are you concerned about taking on too much debt and would rather restrict the amount you can borrow? And what happens if you need to go beyond the agreed interest-free overdraft?
"Some accounts, such as NatWest, RBS and Santander, simply won't let you borrow more than the agreed student overdraft. Others, such as HSBC, will consider extending the interest-free limit. Bank of Scotland, Halifax, Lloyds, Co-op and TSB will make a charge. Barclays, however, is the only account that has a daily charge, and at £1 per day, this could quickly mount up if you tend to be overdrawn.
"For the optimistic, there are some accounts that offer interest on your credit balance, but don't get sidetracked by this unless you are sure you will have a credit balance – most students don't.
"And, if it turns out that managing your money was more difficult than expected, don't bury your head in the sand. Seek advice as soon as possible so that a suitable action plan can be put in to place; after all, studying can be stressful enough without adding to the burden."
Managing your money for the first time can be a huge challenge, but if you're sensible (i.e. don't blow your overdraft during Fresher's Week) and do plenty of research when choosing an account, you could well find one that will see you through your student years with ease.
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