Exactly the same concept can be used with student bank accounts (and to a lesser extent student loans) as they give you a large 0% allowance.
To do this you need to do something I call 'deficit banking', in other words deliberately keep your bank account overdrawn even when you don't need to. Let me use some numbers to show you.
Doris McDoodle isn't very bright
Doris McDoodle has a 0% overdraft limit up to £1,500. She is paid 0.1% interest when she's in credit. Now, as Doris has some other funds, she always carefully makes sure her bank account is in credit - after all, overdrafts are for people who smell. The end result is she earns a paltry amount of cash on her in-credit interest.
Sally McSaucy is super savvy
Sally's in a similar postion, but at the start of year she withdraws £2,000 out of her bank account and puts it in a cash ISA, which is just a tax free savings account (see an article on Cash ISAs).
This means she's being paid £120 interest on the money in the cash ISA, but is £1,000 overdrawn. Yet there's no problem with her being £1,000 overdrawn as she's kept within her 0% limit, meaning it doesn't cost her anything.
As she spends more money, when she gets closer to the £1,500 limit she simply moves cash from the ISA back to the bank account so she never goes beyond it.
While Sally does more planning than Doris, she's effectively earning interest on the money the bank's lending her for nothing. By doing this over your student life you can end up with a good few hundred pounds more in your pocket.
What if you need the money straight away?
Then you can't do this – it’s that simple. However, if you're spending all of your money straight away at the beginning of the year/term, you have a budgeting and financial issue that you need to sort out.
Overall this technique will make you a few extra quid, done correctly, but not a fortune. Yet more important for me is it starts to get you in the habit of financial manipulation.
This is how banks make money from us - by beginning to understand that with patience and thought you can start to turn the tables, you begin to enter the adversarial consumer revolution.
Main image: Martin Lewis, creator of www.MoneySavingExpert.com
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