Saving money is not always easy and it’s even harder if you’re a student with limited income.
The immediate challenge while at university is making sure you have enough money to get by on and learning how best to budget.
Thankfully, the best student bank accounts will offer overdrafts of up to £3,000 with 0% interest, meaning you do have some wriggle room if you need it.
The most important thing to remember is that everyone’s financial situation is different and can change quickly.
If you can get by without dipping into the red and you occasionally have a little bit of spare cash, then it’s worth thinking about building up a small savings buffer.
A little and often approach
It doesn’t matter how little you start saving, it all adds up and before you know it you are on the road to saving for something important like a holiday, a car or even a house deposit.
Remember, saving isn’t just to buy things – if you have loans that need repaying, this too should be a priority to repay and repay early if you can. Getting into the habit of saving regularly is the important thing.
In addition, having a pot of money to fall back on in case of emergency or for a rainy day can make you feel a lot better about your finances.
One of the easiest and most popular ways to do this is using apps that automate your savings.
For example, Moneybox is a free app that will ‘round-up’ your purchases to the nearest pound and save the difference.
Plum is another free app that offers ‘round-ups’ but can also calculate how much you can afford to save based on your current account spending.
It then transfers small amounts into an account for you every few days. You can move this money into Plum’s one-day notice ‘interest pocket’ that offers 0.25% interest or, alternatively, out of the app into a savings account. Many apps also have saving “jars” or “vaults” that help you save for specific items or goals.
Apps like these are great if you find it difficult to get into the habit of depositing money into a savings account. But in return for the ease and convenience they provide you will sacrifice on how much interest you can earn.
Once you are into the swing of saving regularly and decide you want to maximsie your savings then you’d be better off by opening your own savings account.
Maximise the interest you earn
Easy-access savings accounts allow you to withdraw money if you need it without delay and typically without paying a fee. However, you can typically find better paying accounts if you’re prepared to put your money away for a fixed period.
The risk is that if you decide you do need access to it early, some banks and building societies will charge a fee or waive the interest you have earned in the interim.
At this moment in time, anyone is hard-pressed to find a home for their cash that offers more than 2% in interest. In fact, there is not a single savings account that pays more than the current rate of inflation which is 2.5%.
As a student, the thought of building up a large pot of money might seem daunting, but by starting with a little and often approach you may be surprised by how quickly you could have something to fall back on if you need it.