There are many things you can do to start investing but you need to start by making sure you have the right accounts before getting into making investment accounts.

Current account

I recommend a student account as there are many deals on overdrafts that students can get and many banks provide students incentives to use their student account, if you already have a bank account you can most likely just upgrade your account to a student account with your current bank either over the phone or in branch, this will not affect your bank account details so if you are being paid by student finance into this account their shouldn’t be an issue with the payments going into the account. One of these deals could be cash, larger overdrafts, higher interest on any money in these accounts or railcards for transportation in specific zones in London.

Credit card

Apply for one. If you get a credit card and put your mobile phone plan on their or a subscription on there and pay off the balance in full every month your credit score will surely increase. I was skeptical at first but this has improved my credit score tremendously and will allow me to get a mortgage or a loan in the future if I need to. I would recommend the credit club website created by money savings expert as it can tell you your credit score and will recommend credit cards that you can apply for. A mobile contract goes on your credit report but in my opinion, you could save more getting a credit card and paying off your mobile plan charged to the credit card rather than paying off a mobile phone contract which will cost more monthly. There are 2 rules to remember when dealing with credit cards:

  • Don’t carry a balance
  • Don’t withdraw cash on it

Don’t carry a balance only applies to if the credit card is 0% interest where carrying a balance each month won’t increase the outstanding balance on the card, credit card companies are unlikely to give theses to students without any credit history so a normal credit card will most likely be issued to you which has a high-interest rate which will increase the overall balance on the card if you don’t pay it off in full every month. This is how credit card companies make money, as people don’t pay off their credit cards. Secondly, you shouldn’t withdraw cash on a credit card because credit cards have hidden charges for withdrawing cash, if you were to withdraw £10 at an ATM, either a fixed amount will be charged to you or a percentage of the money you withdraw will be charged to you so it’s easier to remember not to withdraw cash as either way you will get charged for it.

Investments

Cash ISA

These are basically savings accounts that you don’t pay tax on. You can put up to £20000 into ISAs each tax year from the age of 16 so that means £20000 split between all of the ISAs that you have opened in that tax year (a tax year is from the 6th of April to the 5th of April). As a cash ISA is basically a savings account, I recommend using this as an emergency fund. That means this account should have enough to cover at least 3-6 months of your total expenses in case anything happens. You should start by trying to build up this account each month so that when you have a job in the future, you get used to saving money and having enough money saved up that if you were to get fired, you would have enough saved that if it took a while for you to look for another job you could still survive.

Lifetime ISA (LISA)

They are used as a way for individuals to buy property in the future or for retirement but it can’t be used for anything else and you can only pay in up to £4000 each year into the LISA. They are either stored as cash LISAs or stocks and shares LISAs. I recommend that if you are looking to buy a house in the next 10 years use a cash LISA as you are able to get to the funds easily when buying a home. If you plan to buy a home after 10 years, I would recommend a stocks and shares LISA as the stock market will outperform any interest you could get on a cash LISA.

Stocks & Shares ISA

They let you invest in the stock market. If you are unsure of what platform to use, I recommend wealthify, if you don’t have a lot of money to spare or nutmeg which are both Robo-investors which invest in funds on your behalf. These services will allow you to learn about investing and will help you understand how investing works. When using wealthify and nutmeg I would recommend setting your choice to the highest risk level so that if the stock market increases the money you have in the stock market will also increase greatly. I also recommend staying away from the ethical investment choice as these have higher fees than the original investment choice. For nutmeg, I would also recommend sticking to fixed allocation to reduce the fees taken by the platform. If you feel more confident with your investment choices, I would recommend using a free broker like trading 212 as they offer stocks and shares ISAs without the need to pay a fee to invest in the stock market and you can invest in as little as £1. For information on what to invest in on trading 212, I would either recommend investing in a fund named VWRL or go on moneyunshackled.com and follow their portfolio distributions to build a global index tracker. Investing in funds lets you invest in multiple companies without having to buy a full share of each company. The stock market can be very volatile so invest only what you are comfortable losing, however, the likelihood of the stock market not recovering is very slim which is why I still see this as a good investment choice. This account should be seen as a long-term investment so try not to dip into this pot, try to use the cash ISA for any money you need desperately.

Innovative Finance ISA (IF-ISA)

This is an ISA that essentially lends your money to companies, businesses or people so that you can gain interest on the money you put in. This is like giving out loans but instead of the bank doing this, the company you use to handle your innovative finance ISA match the money you put into your account to a person which wants to borrow that money. Cash, stocks and shares and lifetime ISAs are all covered by the FSCS which basically means that if the company holding your money goes bust, you can claim up to £85000 worth of money that you hold with these companies but for an innovative finance ISA, there is no FSCS protection so choose the company that you hold this ISA with wisely. This account is the only account that I highly advise against as, unlike the stock market where you can guarantee that the stock market as a whole will recover, with an innovative finance ISA if the company managing this ISA goes bust you have lost all the money you have put into this account and you can’t get it back.

My recommendation…

I recommend looking at money-saving experts’ website for their recommendation on the best interest rates you can get for each account. If you are unsure of where to put your money I would not use innovative finance ISAs and I would stick to the others, however, if you choose to use an innovate finance ISA I recommend only putting less than 5% of your maintenance loan in this account each year.

Cryptocurrency

I don’t recommend investing in cryptocurrency if you are not sure what cryptocurrency is look, into cryptocurrency investing through r/UKPersonalFinance or research into the topic. For simplicity, I will state that cryptocurrency shouldn’t be seen as a place to hold assets in a stable environment as cryptocurrency is very volatile. If you choose to invest in cryptocurrency, I recommend using Coinbase or Binance as they are the most reputable and when investing in cryptocurrency please use a two-factor authentication app to secure your account. If you choose to invest in cryptocurrency, I recommend investing less than 5% of your maintenance loan each year with a portfolio weighting of 50% Bitcoin, 40% Ethereum and 10% in altcoins of your choice. Personally, I started investing in cryptocurrency as the stock market was quite volatile in the past couple of months but I wouldn’t recommend this for an average student.

Example weightings

If you have a monthly budget of £500 and your total expenses come to £300, you could save £200 a month. I recommend £100 into your stocks and shares ISA and £50 into your cash ISA and LISA. If you choose to open an innovative finance ISA I would reduce the £50 into a LISA to £40 into a LISA and £10 into an innovative finance ISA. However, if you also decide to try cryptocurrency, I recommend putting £25 into your LISA and putting £12.50 into both your innovative finance ISA and cryptocurrency. Depending on your circumstance you could place more or less money into these accounts and depending on your risk appetite you may choose to invest in cryptocurrencies and an innovative finance ISA or to invest more in the stock market but this depends on your financial situation and how you feel about each of these investments.

Referral Links

This just links to the cryptocurrency platform I use. If you decide to get into cryptocurrency I still suggest that you use Coinbase or Binance as they are more reputable. The platform I use is called crypto.com which lets me use my cryptocurrency to pay for real world items using a debit card from the platform, Binance offers something similar but I got my crypto.com account before Binance released their version. If you use my link you and me both get $25 in CRO but you will only able to access that amount after buying at least 2500 CRO (which is approximately £116). The referral link will only work correctly on mobile so if you are on desktop my referral code is :4ku8sxwa8k

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