University finance: Alvin Hall's guide for students

Heading off to university is the first taste of financial freedom for many students.

Rolling into university with a loan cheque boosting your bank account, it is hard to start of thinking of financial planning and budgeting. But there are plenty of decisions to be made. TV financial guru Alvin Hall takes us through student finances.

The first decision is which bank account to choose.

A total of 11 high street banks are queuing up to offer student current accounts, with a number having added extras to choose from and offering credit cards and overdrafts.

Usually banks offer a tiered overdraft – increasing which each year of study – however, one bank is breaking this mould.

The highest possible overdraft – of up to £3,000 – is offered by Halifax.

However, the bank warns not all students will qualify for maximum overdraft.

Halifax also offers interest on in-credit balances, but none of the other added extras usually offered to attract students, with the bank claiming it is trying to sell account for its own benefits.

Abbey offers a stepped interest-free overdraft rising from £1,000 to £2,000 over the course of a students studies and a £50 cash bonus for opening the account.

Lloyds TSB offers a similar tiered overdraft, £20 for opening an account a further £20 for recommending friends, an £10 NUS extra card, YHA membership for a year, and 35 free downloads from eMusic.

Barclays, meanwhile, offers overdrafts stepping up from £1,000 to £2,000 and two free cinema tickets a month for six months.

Royal Bank of Scotland offers £100 off a laptop, a £50 mobile broadband voucher, gig discounts, two-for-one cinema tickets, and payment card insurance.

Alvin Hall recommends looking beyond all the gimmicks when choosing a current account, and instead looking for one that suits your needs. In particular he suggests the safety net of a tiered overdraft.

"I like the current accounts that give you the tiered overdrafts. I think getting access to too much money upfront is often very dangerous," he explains.

"Unless your parents give you the skills set to control that, the chances of going off the rails are really strong."

Besides current accounts, banks also offer a range of credit cards.

However, Alvin warns against being to ready to play with plastic.

"I think one of the greatest threats to students is credit cards. They want money to be magical and I cannot tell you how many students I have come across who see the credit limit as actual cash. They don't see it as debt, they see it as cash," he explains.

"People forget the fact this is debt. If you spend this money you go out and get another credit card, you get yourself into more debt and there will be consequences. When you get out of university and you have a massive credit card debt, you are putting yourself in a disadvantageous situation."

But Alvin does not advise people to run away from debt – which is now a fact of life for students – with debts of over £30,000 for a degree now possible.

"Going to university is a great long-term investment in yourself and your future earning potential," he says.

"Debt is new in education for this generation of British people. But if they look across the pond at America, we always had to go into debt unless your parents were rich to get an education.

"I certainly did and everyone of my friends had student loans, some with staggering amounts of debt. A recent friend of mine graduated with $40,000 worth of debt. We have a different attitude to it. We view it as something you have to do in order to give your self that extra leg up in a career."

But with debt and high costs come some decisions to be made.

Alvin explains you have to weigh up the costs of leaving home with the benefits of independence.

Then once you know where you are, it is time to look at if you have to work and setting a budget. And the biggest expense may well be beer money.

"The biggest expense is socialising. Whether is is going out with a group of people for the weekend, going out to the pub, going out to movies, having a great time," Alvin says.

"In some way we want to believe if we are having a good time we should have endless money and there should be no consequences to our actions and money should just flow easily out of our hands.

"But in reality socialising is a big expense, and for most people it is the area where they tend to go off the tracks."

His advice is go out and spend only what you have in your wallet.

"Don't be shy to say to your friends, 'oh, I'm so sorry I can't buy anymore, I have a budget and I can only spend x amount'. When you say that to the group, someone else in the group is going to feel relived, because they feel the same way and may not have the courage to say it.

"So be honest about what you can spend and set limits."

Heading to university, the advice is not to be blinded by the big wad of money you are suddenly given.

"Learn to regularise your money immediately," urges Alvin. "This means there is a fixed amount you pull out every week or every month. I like the weekly withdrawal, because then it gives you seven days to manage your money.

"And when it runs out at the end of the week people will learn how to cut back."

The next decision is about whether to work.

Alvin, himself, worked during university after making the decision he needed the independence of living away from home – as his mother would have locked the door at midnight if he was late coming back.

"Working while you study requires a lot of discipline. I worked in a chemistry lab at university and in a library. I had to be very disciplined. I think you can do both but you have to decide what you are going to give up.

"So I didn't go out during the week, I went out at the weekend but I didn't stay up so late I wouldn't be tired."

He adds: "People focus too much on what they are going to give up. Instead they should focus on what you are going to end up with if you do it right."

As well as working, choosing where to live is a major decision.

A poll by Lloyds TSB shows 27 per cent of people starting university are planning to live at home with their parents to save cash.

However, Alvin advises people to look beyond the old model of automatically leaving home to go to university. But parents and children need to sit down and work out rules so students have freedom and parents are not lift sitting up until 3am or cleaning after them.

"People are often trapped by past models. They think things should remain the same as when their parents went to university. Today there is less money available from educational grants. The cost of living has gone up. You have to change things and adapt.

"Those people who are most adaptive, will be those who will be able to get an education, with the lowest level of debt and be able to pay off their debts sooner and moving on with their jobs."

He advises sitting down and setting ground rules.

"If you are going to stay home, you need to negotiate what freedoms you have, what times you are going to come home, how much laundry you will do, if friends can stay over.

"You have to negotiate with your parents how late you can come in at night, friends you can have over, what you are going to cook and what chores you are going to help out with."

And after university – after you have made a few mistakes and learnt how to look after your money without running back to your parents - Alvin's advice for success is to grab what opportunities come your way.

"I think luck exists in all of our lives and if you have the right skills set and you are constantly monitoring yourself, you can grab the right moments.

"Rather than saying 'God I don't know anything about that', I said I am going to grab this. The worst that can happen is I can fail, but if I work hard I'll increase my chances of being successful."



Daniel Barnes