We've put together some top tips for finding the best bank account for students.
As young people grow up, there is always a long list of things to prepare for, including choosing the right student bank account. It's a good idea to have a chat about managing money with them before they start college or university, including the challenges of budgeting and how to manage bank and credit card accounts.
Student bank accounts are set up specifically for those in higher education, offering benefits such as interest-free overdrafts.
In order to open a student account, you'll need a UCAS confirmation letter with an unconditional offer or, if your offer's conditional, A-level results that meet that condition, or a letter from the university with confirmation of your place.
New applicants for a bank account with an overdraft will be credit checked by the bank to decide if they want them as a customer. It'll be based on previous financial data that shows how the applicant is likely to manage a student bank account. As a student, there's likely to be very little data, which makes credit checking tough and can sometimes leave students rejected. Find out more about building credit history for students.
Start by understanding your income - when you're working the idea is that you shouldn't spend more than you earn, but when it comes to those going to university, you need to look at it slightly differently:
Add up your student loan + employment earnings + money from family + any grants/sponsorship money = your income.
For those going to university or college, funding is key. Make sure you're aware of the loans and grants available to you and plan accordingly. See the Money Saving Expert's student loans guide for more on fees and funding.
While overdrafts are very useful and can really help out with cash-flow issues for students, it's important that they aren't seen as part of your child's income. Overdrafts are loans, even though they might be interest-free as a student, they won't always be and will need to be repaid at some point. If your child can keep their living costs low and budget effectively, they may not need to use their entire overdraft limit, meaning there's less to pay back eventually.
Overdrafts are only available to those who are 18 and over, UK law doesn't allow banks to lend to anyone younger. Some banks do allow you to open an account at 17, which is particularly useful to Scottish students who are likely to finish Highers and start university at 17. If that's the case, they won't offer an overdraft as part of the account until they turn 18.
Things to be wary of with overdrafts:
Don't be swayed by the freebies offered as part of some student bank account packages, including free travel cards and Amazon vouchers. Though very useful, the most important aspect for most students is the interest-free overdraft limit. If managed well it's the cheapest loan they'll ever be offered.
Your advice can help set up your child to be independent and manage their finances on their own. It will help to encourage behaviour that will start them off on a sure footing financially and give them the knowledge to move forward through university on an even financial keel to the next stage of their life.
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