Staying on top of spending is key to a healthy bank balance at university, but if you really want to keep your finances in shape and save money, a good place to start is the account itself. Here, Times Money runs through the student finance basics, from current accounts and credit cards to loans and bursaries.

Student bank accounts

The chances are that you will be with the bank you use as a student for at least three years, if not the rest of your life, so give yourself time to think carefully before signing up.

David Malcolm, finance officer for the National Union of Students, suggests looking at the details, which could make a big difference. An interest-free overdraft will come as standard, but ask how much you will be charged if you go over your limit. Mr Malcolm says: “Also think about logistics: are there branches nearby and how much support is there for students in those branches?”

Halifax is offering the biggest free overdraft this year, at £2,750 from the first year. That figure is set for the full three years, rather than increasing gradually, as with most other student overdrafts. However, this is an “up to” figure, so not everyone will be eligible for the full amount. NatWest gives students a five-year Young Persons Railcard, which cuts train fares by up to a third. The free overdraft starts at £1,250, rising to £1,600 in your third year. Lloyds TSB, meanwhile, has a £1,500 free overdraft and promises £75 cash back after your first year, but only to those who manage the impossible and stay in credit.

Mr Malcolm adds: “The trick is to look beyond the gimmicks. Something useful, such as the railcard, will always be popular because, though inexpensive, you can save a lot more money over the course of five years.”

Most banks allow graduates a bit of time to pay back their student overdrafts interest-free. HSBC has reversed its decision to end free overdrafts for graduates, but others, such as Halifax, allow only a year to repay the free overdraft before charging you interest.

Credit cards

You are likely to be offered a credit card, or sent one automatically, when you open a student bank account, but remember that these cards must be handled with extreme caution.

Halifax and NatWest, for example, add student credit cards to their current account packages and charge interest of 17.9 per cent and 18.9 per cent respectively. Blow £500 on the NatWest card and, sticking to the minimum monthly repayment of 2.25 per cent, you will be paying it off for 14 years at a total cost of £1,104.20.

Lisa Taylor, of Moneyfacts, the financial website, says that credit cards should be used only in emergencies, adding: “It is easy to get caught out. The interest adds up quickly and paying off the balance is hard if you are not earning.”

It is likely that your card will be designed specifically for students. The Barclays Student credit card has the lowest rate, at 14.9 per cent, and includes delivery protection for online purchases, free text reminders of payment dates and fraud protection.

If you have already racked up credit card debts, perhaps on a gap year, it may be worth consolidating the debt with a 0 per cent balance transfer. The Virgin Money MasterCard charges 0 per cent on balance transfers for 15 months, but remember that the rate then rises to 15.9 per cent. For large purchases, such as a laptop computer, you could use the Purchase Card from Halifax, which offers 0 per cent on purchases for 15 months. After that, however, the balance is charged at 14.9 per cent.

As with all credit cards, if you clear the balance by the end of the month, rather than sticking to the minimum payment, you will avoid paying any interest at all.

Loans

Student loans are designed to cover tuition fees and help with living costs. Interest is charged at the rate of inflation. The maximum loan amounts are £3,070 a year for tuition fees and £6,315 a year for maintenance.

New students from low-income households – with income, after allowances, of less than £38,330 – are eligible for a nonrepayable maintenance grant of up to £2,765 a year. Information on funding is online at www.studentsupportdirect.co.uk and you can apply for grants and loans at www.direct.gov.uk .

This year’s deadline for loan and grant applications was June 29, but late applications are accepted until nine months after your course’s start date. Latecomers may receive their first instalment after the start of term, which can make for tough budgeting.

You must start to repay the loans once you are earning more than £15,000 a year. Repayments are 9 per cent of income above this and are deducted from your salary. The self-employed make repayments directly to the Student Loans Company.

Bursaries

There is more financial support available than you probably realise. A survey by the Department for Education and Skills (DfES) this year found that two thirds of students did not realise that their university could offer nonrepayable bursaries from £305 to £1,000.

Next month the Government is starting a campaign to let students know what is available. Your first stop should be the Bursary Aware map at www.bursarymap.direct.gov.uk, which gives details of all bursaries available from universities and higher education institutions in England.

Jenna Khalfan, of the NUS, says: “There are different pockets of money available and students often miss out because it is not made clear. It can be an easily missed tick-box on a form that is the difference between getting a bursary or not.”

Universities that charge full tuition fees of £3,070 have to offer bursaries of at least £305, though many offer more to students from households with income of less than £17,900. From next year, this threshold will rise to £25,000.

The Aim Higher website at www.aimhigher.ac.uk has a list of the different sources of financial support. These include the Access to Learning fund and specific funds to help the disabled and students with children.

Don’t dismiss savings opportunities

Student savings may sound like an oxymoron, but if you can put away a little, it will prove invaluable if you are hit with unexpected expenses.

A tax-free instant-access Isa from National Counties Building Society can be opened with as little as £1 and pays a market-leading 6.26 per cent.

If you are not working and need not worry about tax on your savings, a standard online savings account will work just as well as an Isa. Sainsbury’s Bank’s Internet Saver pays 6.25 per cent.

Sue Hannums, of AWD Chase de Vere, the independent financial adviser, suggests putting a chunk of your student loan in a savings account. “You can drip-feed money into your student account and earn interest on the rest,” she says.

CASE STUDY

Anna Griffiths, 22, is starting her third year studying psychology at Roehampton University, London. She has a student account with Halifax, with a free overdraft of £2,750.

Miss Griffiths, left, has a student credit card with Halifax, which she leaves at home. “It is useful to have one,” she says, “but I don’t trust myself to carry it around with me.”

She also has a web-saver savings account with Halifax, where she keeps the cash she saved while working over the summer.

Her advice to new students is to set a weekly budget and put aside money for the household bills, adding: “It is hard to stick to, but it’s easy to run out of money if you do not.”

A quick course in costbusting

Sorting a student loan and bank account takes time and hassle, but is just the start, writes Mark Bridge. To leave university in good financial shape, you will need to secure affordable housing and streamline living costs. As ever, making the effort to shop around is key.

Accommodation and living costs

The cheapest option is to live at home with parents. But for many students, that misses the point of the university experience. If you do fly the nest, housing will be a huge expense. Halls of residence offer a sheltered introduction to life away from home and can be cost-effective for first-year students.

For example, City University in London charges undergraduates from £94.50 a week, including utilities, undercutting average rent costs in the capital. Most halls are booked up for this year, but Jenna Khalfan, of the National Union of Students (NUS), says that places should become available as students drop out.

The specialist website at www.accommodationfor-students.com says that students who rent outside halls pay an average of £60.58 a week, or £2,907.84 a year, before household bills of about £25 a month. London rents are much higher, at £102.33 a week. William Berry, the site’s founder, advises students to visit five to ten properties before deciding and suggests that students will get more for their money farther away from campus.

If your parents are well off, you could try to persuade them to invest in a student buy-to-let. Spare rooms in the house, or flat, can be rented to cover the mortgage, so you can live rent-free, or at a subsidised rate. Your parents, meanwhile, should benefit from an income boost and long-term capital appreciation. Melanie Bien, of Savills Private Finance, the mortgage broker, says: “Property in a university town can be an excellent investment because there is a ready supply of tenants.”

You are not liable for council tax if you live in halls or an all-student house or flat. If you live with nonstudents, you may be liable for reduced council tax and should contact your council’s tax office for details.

Royal Bank of Scotland puts average living costs, after rent, at £130 a week. These can be reduced by careful budgeting and switching to better utility and telephone deals using comparison websites such as uSwitch.com and moneysupermarket.com. Also look at the money-saving tips for students at www.countdowntouni.direct .

gov.uk, including buying a Young Persons Railcard, which saves a third on rail fares for only £20 a year.

Insurance

A laptop, iPod, games console and digital camera are now standard student kit. Research from Churchill, the insurer, indicates that students take an average of £1,600 of valuables to university and are a prime target for thieves. Basic standalone cover from Endsleigh, the specialist provider, insures possessions to the value of £2,500 from £16 a year for those in halls of residence. Some students are covered free under parents’ household policies, but ask your parents to check this and whether cover is automatic or must be requested.

Insurers require policyholders to report thefts to the police within 24 hours of discovery and most request proof of purchase before paying out for lost or stolen items. Richard Mason, of moneysupermarket.com , says to keep receipts for valuables and a note of serial numbers.

He also advises against making claims on parents’ household policies or standalone policies for losses of less than £400. These can damage your no-claims discount and cost more in higher premiums.

The NUS advises students to consider insurance, but Mr Mason says that basic security precautions, such as a cheap safe and making sure you lock windows, can be a more pragmatic alternative.

Working

About 50 per cent of students work part-time to support their education. Halifax says that undergraduates who work put in about 18 hours a week and make £6,000 a year. However, Ms Khalfan gives warning that working long hours can be counter-productive when it prevents students from participating in CV-boosting activities such as sports and debating.

Classic student jobs are work in bars and shops, but the flexible hours kept by most students allow for some more interesting options. You could work as a film extra in the holidays, for instance, to take home about £80 to £140 a day. Work on the streets as a charity fundraiser pays about £8 to £12 an hour, while paid work experience and placements in industry are a lucrative option for students of engineering and other technology-based degrees.

Opportunities are advertised in your student union’s job shop and on websites such as www.gumtree.com .

Income tax contributions are deducted by your employer, but you will have to complete a tax return if you are classified as self-employed – if you write freelance articles for a local newspaper or magazine, for example. The first £5,225 earned in the 2007-08 tax year will be free of income tax. For a more detailed explanation of the rules, go to the Revenue’s website at www.hmrc.gov.uk/students .

Make the most of mobile phone tariffs

A mobile phone is a must for students but the choice of price plans can be overwhelming.

Stick to plans that offer value and flexibility, says Rob Barnes, of moneysupermarket.com. “It is worth having the option of using more minutes and texts than you think you will need,” he says, “because calls become expensive when you have used up your allowance.”

Mr Barnes recommends the Flext 35 tariff from T-Mobile, available online for £30. This gives you 900 minutes or 1,800 texts a month, or a mixture of the two. You receive a free Nokia N95, a smart internet-enabled handset with a five megapixel camera, and free weekend landline calls. Mr Barnes adds: “You can then bolt on a web-and-walk tariff for £7, which gives unlimited access to the internet on your mobile.”

For students who want the cheapest deal, 3 mobile offers 750 minutes to any network and 100 texts for £17.50 a month online. It has other tariffs for £15 a month, all of which include a free phone. O2 Simplicity gives you a Sim card and contract with 200 free minutes to any network and 400 texts for £15 a month, but no handset.

CASE STUDY

An opportunist thief broke into Philip Savage’s student house in Bristol and walked away with his laptop computer, PS3 games console, watch and digital camera. Fortunately, the 22-year-old from Guildford, who has since completed his business studies course at the University of the West of England, was insured and able to claim for the £3,000 of stolen items.

Mr Savage, right, says that the Endsleigh cover, which costs £124 a year, was a good buy but admits that the break-in may have been avoided with better security – the burglar forced a feeble Victorian window latch. “I don’t know what I would have done without the insurance,” he says.