How to manage your money as a student

4 min | 11 September 2023

The Chase team

While you're at university, an interest-free student overdraft could be one of the most cost-effective ways to borrow money. Here's how to help make yours work for you and the pitfalls to watch out for.

Going to university is an exciting time. But bills and budgets can push you out of your comfort zone, especially if you have little or no experience managing money.

A student overdraft – effectively, a bank loan attached to a student current account that covers you if your balance drops below zero – can be a useful budgeting tool. Used wisely, it can also help build your credit score.

The great thing about student overdrafts is they're normally interest-free. So, if you have a £2,000 overdraft, it won’t cost you anything extra – unless you go over the limit or don't pay it back within the agreed period. If that happens, watch out for interest (which could be as high as 39.9%) and fees. Be sure to read the terms and conditions carefully so you understand what you are signing up for.

What are the benefits of a student overdraft?

If you take out a student maintenance loan, you’ll get this as a lump sum payment at the start of each term. You have to try and make it last, without knowing what expenses are around the corner. For instance, you may need to pay to fix your bike or buy a new laptop.

A 0% overdraft gives you some breathing space. You might use it as a buffer in case of unexpected bills or, if money is tight, include it in your budget.

The golden rule is not to exceed the 0% overdraft, as this could trigger interest and charges. You may end up in serious debt and with a poor credit rating.

Organising your student finances

Living away from home for the first time is usually a lot of fun. There will be a few challenges, including organising your finances, but with some planning you can aim to live within your means and budget for all your expenses.

You can calculate your budget in 3 easy steps:

  1. Work out your total income. That's your student loan, income from a part-time job and any help from your family
  2. Take away essentials. That's your rent, food, transport and bills
  3. Divide what's left by the number of weeks in a term, including holidays

Ta-da! You've now got your weekly budget.

This is your disposable income, so it'll need to cover your everyday spending (like non-essential food and clothes), as well as fun stuff (like seeing friends, hobbies and university trips away). Having a weekly budget, rather than a monthly one, can help you stay on track. It can also stop you going overboard at the start of the month, then running out of cash at the end.

Another great thing about a weekly budget is that it's easy to review more regularly. Set a reminder to check back after 3 weeks and see how your budget's stacked up. Look out for surprise expenses or accidental overspending, then tweak your budget for the next few weeks and review again.

If you’re sharing accommodation and paying bills with your housemates, rather than choosing one person to pay all of them and collect money from the others, think about putting each bill into a different person’s name so you share the responsibility. There are also apps that split and track bills between housemates.

Check the overdraft small print

  • Weigh up bank accounts that offer student freebies. If your university gives you a free bus pass, for example, then a four-year railcard may not be worth as much as an account with better overdraft terms. Which deal could save you more money throughout your studies?
  • It’s useful to make a note of when the student overdraft stops being interest-free. The account will probably become a graduate one once you leave uni, and the interest-free overdraft can get smaller each year. Put the dates in your calendar so you don’t get a shock in the future!

Above all, remember to keep tabs on your overdraft while you’re studying and once you graduate. It might be a good idea to set up bank alerts so you're notified of going over your arranged overdraft.

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products and lifestyle management. These articles are not financial advice. Articles may reference products and services which Chase UK does not currently offer.

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