WHAT is on a student’s mind? Getting totally wrecked at all-night parties on cheap and nasty alcohol, close encounters of the amorous kind, perhaps a little studying when you can fit it in. But bank accounts? Well, probably not, but they should be. With student debt reaching record levels — the average graduate leaves university owing £17,000 — the relationship with your bank is crucial.

Get it right and it could be the start of a long and happy marriage. Get it wrong and it could end in an ugly break-up, with the ramifications felt well into your working life. Fortunately, there is now plenty of advice on how to maintain a harmonious relationship with your bank, as students and their finances are now the subject of doctoral theses and management school studies.

Boys should, in particular, heed words of counsel on management, for males tend to be the worst undergraduate money managers, according to Adrian Scott, co-author of Student Debt: The Causes and Consequences of Undergraduate Borrowing in The UK. He says that men are, on average, £500 more in debt than women and spend more than twice as much on alcohol.

But both sexes can be prone to arriving at university and promptly forgetting the financial prudence that they learnt when husbanding their pocket money, says Sue Eccles, of Lancaster University Management School. Dr Eccles says: “Young people tend to be quite good money managers at school. But in their new life, they are suddenly presented with large sums of money. They go into over-spending mode in their first week, buying books, joining clubs and going on big drinking sessions.

Debt-blindness then sets in: their borrowings are escalating but the students have no idea how much they owe.”

Probably the best person to show you how to stay friends with your bank is a bank manager. Stephen Hodgson manages the HSBC branch on campus at Hull University. He will not be drawn on the worst cases of student debt that have come to his notice in his many years in the job. But his experiences with overborrowed 20-year-olds have encouraged him to open savings accounts for his children so that they will have a cash buffer for their undergraduate years.

Mr Hodgson says: “First, students should draw up a budget. Add up any money from grants, parents, summer jobs and anything else saved, and then estimate what life at university is going to cost you — tuition fees, course books, travel and socialising. Don’t forget to include insurance premiums — many students now have a PC, TV or bike, all of which are targets for thieves.

“If it looks like you are going to be short, then at least you know in advance. You then know how much you are going to have to borrow or earn from a part-time job. If you need to borrow, the cheapest way is through an interest-free overdraft, and after that a loan from the government-sponsored Student Loans Company.

“Finally, it is important to talk to your bank if you are running into financial difficulties. Chances are that it will be helpful and sympathetic — the bank will have seen this scenario before.”

All sensible advice, but you do wonder whether students will follow it. We asked two of them what they thought of Mr Hodgson’s tips.

Zoe Hood, 22, has just finished a BA in English at Manchester University. She thinks that Mr Hodgson’s advice is “sound, if a little idealistic”. Though she worked for much of her undergraduate career, she thinks that it could become too much and hit your grades, particularly when finals are looming, and does not believe that financial prudence alone will solve problems of student debt.

She agrees that budgeting is an important skill for students to learn, both for their student days and their life afterwards. But she adds: “But I think careful planning tends to go out the window at some point.”

Meggan McCartney, 18, is about to start a physiology and psychology course at Worcester College, Oxford. She says that she found the tips useful and would follow up the idea of buying insurance cover for her student rooms.

Really, worrying about getting into debt is not the issue. Mr Scott says: “Most students get into debt these days. The difference is by how much and what kind of debt it is.”

Dr Eccles agrees: “There is a fine balance to be struck. Most students will have no trouble with their debts and will see them as an investment rather than a debt. Starting university and controlling your finances is also empowering.”

For students who are worried about debt issues, Credit Action, the money education charity, has recently published a revised edition of its Student’s Guide to Better Money Management.

LINKS

Credit Action: 01223 324034, www.creditaction.com;
HSBC: 0800 130130, www.hsbc.co.uk.