Tim Hele is a chemistry student with a talent for financial alchemy. He may not have found the secret of turning base metal into gold, but by investing student loans, interest-free overdrafts and his savings he has amassed more than £21,000.

The 18-year-old, who is in his second year at Exeter College, Oxford, says: “I view managing my finances as a part-time job and spend a lot of time researching accounts. Last year interest from my savings made up more than a quarter of my income.

“My goal is to continue investing cheaply borrowed cash and money from my student loan so that, by the time I graduate in 2011, I will be able to repay the debt and have a lump sum for a house deposit or a car.”

As most of Tim's money is in cash, he would like advice on investing in equities, for the possibility of a better return, but he has two concerns. He explains: “First, as a Christian, I would like to invest ethically. I am averse to obtaining money as a consequence of others losing it, so rather than shorting shares, I would be interested in ‘long' unit and investment trusts, as opposed to absolute return. Secondly, as I want to invest for only three years, I am concerned that dealing charges may erode any profit.”

Tim's savings - including £7,000 from part-time jobs, a £1,000 legacy and about £8,900 in cash gifts from relatives and parental allowances - have earned him £4,100 in interest. They are distributed in several accounts - which, when Tim first contacted us were paying what now seem impossibly attractive rates - including £10,000 in a NatWest cash Isa at 6.87 per cent, £4,400 in the instant-access Bradford & Bingley eSaver at 6.51 per cent, £500 in a Yorkshire Building Society One Day account at 4.9 per cent and £800 in Scarborough Building Society's Children's Savings Bond, tracking at 1 per cent above the base rate. “I pay in £10 a month and it matures next year,” he says.

As well as saving hard, Tim takes an enterprising approach to borrowing to invest. He says: “I walked into my local NatWest, asked for an overdraft and was offered £1,400 interest-free on a student account. I opened the account, withdrew £1,000 and put it in a NatWest e-Saver, offering 6.5 per cent, which I receive gross because I don't earn enough to pay tax.”

The account also holds a £5,500 allowance to see him through the academic year.

In January Tim invested £7,050 - earnings from last year plus loans from the Student Loans Company - in Northern Rock's Fixed Rate Access Bond at 6.9 per cent. By August this had grown to £7,291, which he put in a two-year bond with Anglo Irish Bank, paying 7 per cent - a timely move before rates dropped dramatically.

During term time Tim earns £55 a month as a student computing assistant at his college. In the summer he worked at Woburn Safari Park, Bedfordshire, earning up to £800 a month, while living free with his parents. But this summer he will have to pay for accommodation. He says: “I would like to work in organic synthesis for a pharmaceutical company, so I intend to test the water via internships, probably in London, or wherever there is an opportunity.”

His main monthly outgoings are £510 for rent and utility bills, plus about £150 on food. He rarely eats out and says: “Lunch costs only £2 in the amazing 17th-century wood-panelled college hall. The meals are cheap because they are subsidised by the fees and rent I pay, and a few times a term there are special dinners with four courses and wine for about £10.”

Tim cycles around Oxford, so has no travel costs, and bought his course books with tokens won as academic prizes. He finds plenty of free entertainment as a member of the quiz squad, singing in a choir and playing the trombone with his college orchestra. But Tim also saves by default.

“I am so busy with academic work that, luckily, I have little time to spend money,” he explains.

Tim Hele: What the experts say

Ethical investing, Danny Cox, Hargreaves Lansdown

“Tim is an exception: a student living within his means and saving from a limited income. His money is working well for him and I would encourage him to continue investing in a cash mini-Isa every year to build a tax-free nest egg for when he is a taxpayer.

“Tim aims to invest ethically over three years, but any investment with a risk to the underlying capital should be made for five to ten years. So stock-market-based funds, even without the current uncertain market, are simply not appropriate for him.

“Cash-based deposits are Tim's best bet, with one and two-year bonds still offering attractive rates. However, I expect these rates to continue to fall.

“Any money Tim can invest longer term could be saved in an equity Isa. He could look at Jupiter's Ecology Fund. He can invest within an Isa for as little as £50 a month through a fund supermarket, where initial charges are discounted heavily. The fund invests in companies that are commited to long-term protection of the environment.”

Action plan

Stick to cash deposits for the short term: mini Isas and fixed-term bonds.

Look at the Jupiter Ecology Fund for longer-term ethical investing.

Ethical investing, Graham Beaver, Savills Private Finance

“It is commonly understood in the investment industry that to expose your money to equities you need a five-year time frame. Anything less than that increases the risk that the markets might fall and not recover by the time you need your money back - even more of a risk in the current market volatility.

“For a three-year investment aimed at raising a lump sum, it is not worth Tim risking his money to a potential stock market fall. Over the past few weeks there have been swings of more than 7 per cent in a day, which is too great a risk when taking a three-year view.

“Over a three-year period deposit accounts are more appropriate. For an ethical investment bias Tim could look at the Co-operative Bank. Its customer-led ethical policy sets out where it will and will not invest members' money. It currently offers a Fixed Term Deposit account for one, two or three years, at 3.5 per cent.”

Action plan

For short-term ethical investing consider putting money in a Co-operative Bank deposit account.

Christian investing, Lee V. Coates, Ethical investors

“Tim wants his faith to guide his investments, but using banks to deposit funds conflicts with his beliefs. He must compromise his faith or change his arrangements. I suggest the latter, as it requires less of a long-term explanation - eternity.

“The problem with banks is that you have no control over who they lend to - your money could end up in arms, pornography, human exploitation, child labour or destroying the environment, over which God has given us all stewardship.

“Building societies are a better ethical option, and the interest rates are just as good. There are ethical societies, but their rates are not high and at this stage in his life Tim needs to maximise returns within his ethical values. Building societies are generally not involved in day-to-day financing of companies, so you can view your money as ethically neutral, so use societies offering the best rates.

“With an investment term of only three years, I would not recommend stock market funds, ethical or not. The risk to capital is too great to justify it. Instead, he should make maximum use of high-interest accounts, perhaps online because these generally offer instant access with a higher rate.”

Action plan

Switch to building societies as a better ethical option than banks.

Try online accounts for instant access and generally higher rates.

Christian investing, Marie Potter, Association of Christian Financial Advisers

“As a Christian financial adviser my advice goes beyond the monetary. So I would ask if Tim feels it right that money gifted or borrowed to pay for his education is risked in stock market funds that could make a loss.

“Tim should instead keep his money on deposit. He might consider the Kingdom Bank and Reliance Bank, which have a strong Christian ethos. The Co-operative Bank is also well known for its ethical stance and of these three offers the best rates. He will not earn as much interest. The Co-op's instant-access Smart Saver pays 1.18 per cent, and its Fixed Term Deposit account for up to three years, pays 3.43 per cent.”

Action plan

Split cash between instant-access and fixed-term deposits.

Keep investing annually in cash Isas.

Consider the Co-operative Bank for a transparent ethical policy.

Tim's verdict

I will continue to invest in cash through Isas, instant-access accounts and bonds, mainly via the internet. I have never intended to leverage equities, and after removing debt, inaccessible money and budgeting for this year, I have less than £5,000 to invest freely.

This, combined with market volatility and my short-term view renders equities inadvisable, and although pound cost averaging is a useful tool, my income is too sporadic to invest monthly. When the markets are more stable, and

I can take a longer-term view, I shall consider ethical unit trusts such as the Jupiter Ecology Fund.

The interrelatedness of the economy means that no investment is ever truly ethical, but I do not consider banks to conflict with my beliefs. Their money could finance environmental damage, but so could a loan from a building society or the Co-operative Bank. I will, however, consider mutual organisations in preference to banks. Ethical finance can take other forms, such as buying fair-trade and charitable giving.

Would you like a financial makeover? Write to Money, The Times, Times House, 1 Pennington Street, London E98 1TB, marking your envelope Money MoT, or e-mail moneymot@thetimes.co.uk. Please include current finances, short and long-term goals and a daytime telephone number. You must be prepared to disclose your income and be photographed.