Cash between Loans

One of the annual conundrums I have faced during my time at university is how to navigate the financially baron period towards the end of term. This perennial issue is brought about as the final few pounds of the student loan instalment received a few months previously have finally left the bank. At Christmas the problem is amplified by the levels of necessary expenditure required to get home, buy presents, and for entertainments over the holiday period.

There are a number of tried and tested methods of conserving or raising cash to cope with this lean period before the next instalment of the student loan arrives. Some of these require a little willpower and some reasonable financial organisation; others are simple stop-gap solutions that, whilst being relatively easy resolutions to a pain-in-the-arse of a situation, are only temporarily liberating and are likely to cause the boom-bust cycle to perpetuate.

The most logical method of ensuring an end of term cash-flow is unsurprisingly to save money from your loan the moment you receive it. The best way of doing this is to open a savings account alongside your student or current account. To do this with the least amount of hassle is to set up a savings account with the bank who manages your student account. Although there are of course benefits in choosing a bank whose savings account offers a more attractive rate of interest, the amount of money you choose to save from your loan is unlikely to be large enough to glean any significant interest, particularly if it will remain in the account for a short period of only a few months.

If you choose to open a savings account with your bank, it is possible to monitor both your current and savings accounts online making money transfers quick and easy. The question of how much to save will vary according to the individual. Someone who has to travel from one side of the country to the other to get home at Christmas or Easter is likely to need a significant amount of cash set aside for the cost of the journey. I would recommend that you save a minimum of 20% of your loan (psychologically giving you a good incentive to make future savings), and then make a weekly transfer (by standing order) of 10% of your weekly income (allowance, part-time work, etc.). By the end of term this should yield a reasonably high cash saving.

There are of course easier and quicker ways of raising extra cash at the end of term. I would express caution here however, as these methods are short term and ones where you are effectively ‘borrowing' money that isn't yours to spend. None the less, if you are somewhat lacking in the discipline required to save then these should tide you over until the next student cheque arrives:

•  Extend your student overdraft: temporarily extending your level of student overdraft (usually by £200-250) is a fast and efficient way of generating some extra capital. Most banks have student friendly branches and these are generally the best places to go and grovel. Take your loan schedule notification letter with you and ask for the overdraft to be extended until a few days after your next loan instalment is due to arrive. Please note: you may be required to pay interest on the extra overdraft facility.

•  Get a Credit Card: This really is something that should only be considered if you have exhausted all other options. If you have resisted the urge to get a credit card during your time thus far it would be a shame to bow to the pressure now. Banks are always keen for students to take up their credit card offers so getting one with your bank would not be a problem; however, I would always advise that you shop around for one offering a low APR. Being a student you are classified high risk, so you may find that you pay a high level of APR. If you indulge in this method as a stop-gap, please ensure you repay the balance in full as soon as you receive your loan or you could find yourself paying unnecessary interest. Also, please remember you will always pay a relatively high charge for cash withdrawals so spending on the card should be kept to over-the-counter transactions as far as possible.

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