Student money: how to handle a budget and stay out of debt

Money’s tight when you’re a student, but that doesn’t mean you have to live like a pauper. 

By getting your head around budgeting and understanding your credit options you can keep on top of your cash without getting into debt.

We asked student finance expert Bushara Awan from The Money Charity to tackle questions from the TSR community on debt, credit, budgeting and making money. Here’s what she had to say.

Building a credit score as a student

"Should I look at getting a credit card as soon as possible to help build a good credit score for the future? What are the best ways for students to start building up a good credit score?" asks SirMasterKey 

There is no ‘right’ answer to whether someone should take out a student credit card; it all depends on the individual. Can you trust yourself to use a credit card wisely or will it burn a hole in your pocket? If used in the right way, it can be a useful money management tool and help you get into good payment habits and build a credit score. 

cash machine

However, if you don’t have a fool-proof plan to repay the money each month it is a very expensive way of long-term borrowing and could lead to serious financial problems in the future, so it should not be entered into lightly. 

Credit scoring can have a huge impact on your later life and affect so many things (buying car insurance, for example) so if there is any chance you might misuse your credit card and damage your rating, do not risk it! You can build a good credit score from other (perhaps safer) ways including; your mobile phone contract, being on the electoral roll and paying your bills on time. 


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Can I blow my student overdraft?

"I know this sounds stupid, but all my friends have a PS4 and I really want one but I can’t afford it! Would it be safe to use an overdraft to buy it? I have an overdraft of £1,500 and I haven't touched it at all yet. I'm in first year so I think I don't have to pay any overdraft debt off until I graduate." asks mattohara 

An overdraft should really be used as emergency cash, and not to fund non-essential items (we’re talking an urgent trip home, not a PS4). Saving up as much as you can is a much more savvy way to buy those luxury items. 

However, if you do decide to use your overdraft and are satisfied that you are not going to live to regret the decision, make sure you have a plan to pay it off - one that you will be able to stick to! This is crucial to prevent you getting into habit of living in your overdraft. Like any debt, if you don’t keep on top of it, it will get harder and harder to pay back.

Also, make sure you are shopping around for a 0% interest overdraft, without fees. Check the terms and conditions and understand what the repayment terms are after graduation. Every bank is different, so do your research. 

credit card

Is it wise to get a student credit card?

"I ran into a shortage of cash this month and would like to apply for a credit card. Am I right in saying that as long as you pay back what you owe within the agreed period there is no charge? Will I be successful in application? I literally have no credit history." asks 2710. 

Firstly, make sure you have looked at all the options available to you, and assess which would work best for you. Perhaps an interest-free overdraft would be a more suitable option, that way there is no risk of falling foul to going over the free interest period and you have more flexibility to pay it off at your convenience. Also an overdraft would be easier to get without any credit history. 

If you have maxed out all of your other options, don’t take on more credit to get yourself out of a debt spiral until you’ve talked to someone who knows the score on student finance – start with your university or SU’s welfare adviser, contact details for each institution can be found on 
However, no matter what type of credit you take on, such as an overdraft, credit card or mobile phone contract, make sure you have a dependable plan to repay the money. That way you are free to enjoy uni to the full without having to worry about money! 

how to stay out of debt

How do I stay out of debt?

"How do you manage not to live beyond your means? How do you manage your expenses to not exceed your monthly/yearly budget?" asks kka25. 

One of the best ways to stick to a budget is to be realistic (and honest!) about your spending. Understand exactly what is going out each month, and make sure you plan for those unexpected expenses too (birthdays, unexpected trip home, large phone bill).

Budgeting shouldn’t be seen as depriving yourself, quite the opposite. Creating a budget allows you to know how much money you have coming in each week or month, how much you have to cover all the essentials (rent or mortgage, existing debts, bills, groceries etc.) and therefore how much you have left to spend on the things you love!

There are lots of different tools you can use to help you stay on track with you spending. The Money Charity has a free Spendometer app and Budget Builder to get you started. 

Making money at 15

"I'm almost 15 and obviously I go out with my mates but I increasingly find myself short of money. Does anyone have any good ideas for making money at my age?" asks Chocolate Puma. 

The obvious examples are getting rid of unwanted Christmas pressies or things you haven’t used in a while on eBay, music magpie or by visiting a good old car boot.

More unconventionally, if you are pretty decent with a camera you could sell your photos to an image library (such as and earn royalties each time they are used. 
Or, could you be the next Zoella? Why not try setting up a YouTube channel, find your niche, and vlog away from the comfort of your own bedroom. You can start profiting from the videos by becoming a Youtube partner. This means you get paid for impressions and clicks on ads that show up during your video (whatever it may be).

Believe it or not, you can get paid for ‘Googling’ – there is a company that will pay you for clicking on relevant ads every time you search on Google, Yahoo, eBay or even Amazon. It’s a free service called Qmee. 


Checking around for better savings rates

"Should I open a new ISA every year to get the best interest rates for new customers? Would it be worth it in the long run for what could still only be a couple of pounds each year?" asks Queen Cersei. 

It is good to get into the habit of checking saving account interest rates and switching to maximise rates, whether ISA or not.

With ISAs it is important to go through the proper process of transferring savings from any existing accounts to a new account (the new account provider will do this if you complete an appropriate form), otherwise you’ll lose the tax free status of previous years’ savings and putting the money into the new account will come out of the current year’s ISA allowance. 

Some accounts only allow you to make ‘new’ savings, they don’t allow transfers. Sometimes you can get a better rate for new savings than you can for transfers. But how complex you want to make your ISA accounts is really down to how much time you want to put into it.

Alternatives to payday lenders

"Where can students turn to if they find themselves in unexpected financial hardship, to avoid resorting to payday lenders?" asks 

Don’t take on credit to get through a time when you might be short of cash. The first place any student should go is to speak to someone who knows the score on student finance – start with your university or SU’s welfare advisor. They will be best placed to give you instant help and guidance.

Find more money and finance discussion in the forums 

You can get more advice from The Money Charity in its free Student Moneymanual