Student finance: find an account that works for you

Choosing the right bank account is an important if you want to make the most of your student loan. Unlike other current accounts, students are usually offered an interest-free overdraft, which can be invaluable as you start coping with the new and sometimes unexpected expenses that come with independent living.

Imagine this scenario: you are in your first term and your first essay deadline is approaching. Suddenly, your laptop stops working. You haven't budgeted for this, but your overdraft allows you buy a new laptop and meet your essay deadline – it gives you time to earn or budget your balance back into positive numbers.

Martin Lewis, who edits the website moneysavingexpert.com advises students to go for the bank that will give them the biggest and longest free overdraft facility. Pointing out that the average student is likely to graduate owing more than £20,000, he says it's vital to find the cheapest way to borrow.

Another thing to consider is the interest rate, which can earn you useful money. Some banks are still offering freebies to students, such as free cash and a YHA membership. A few years ago you could take advantage of these by opening several student accounts, but it has become more difficult since then with banks usually requiring your main income or student loan to be deposited with them.

There is now little financial advantage to having more than one account, but they can help control your spending. Christian Keating, a second year engineering student at the University of Edinburgh, keeps his spending under control by making use of three bank accounts. He has two current accounts with the Co-operative Bank, and a student account with RBS, which he opened when he was accepted by Edinburgh. "My student loan is paid into one of my Co-op accounts, which gives me a higher in-credit interest than any student account would," he says. "Then I transfer money every month into my RBS student account, which I use to pay my rent. I also give myself a monthly spending allowance which I put into my other Co-op account, which does not let me take out more money than I have in there. This helps me keep track of how much money I'm spending, and stops me overriding my budget."

It is vital to calculate your budget before going to university, because the lifestyle change is huge. Make a simple spreadsheet. On one side, establish your income, which includes your student loan and things such as earnings from part-time jobs or parental contributions. On the other side, list your outgoings, which include rent, food, mobile phone bills, laundry, toiletries, books, photocopying and social life costs. Divide your income into how much you can afford to spend on each of these each month and week. Even if you don't stick to the budget, it makes you realise when you are overspending and when you will need to compensate for it by splashing out less.