It’s never too early to think about your financial future. Unfortunately, despite financial education being available in UK secondary schools, its rollout and implementation, including resourcing and upskilling of schools and teachers leaves room for improvement. This also means that a lot of new graduates or people fresh out of school have little idea how to look after their money. In fact, it could be this incompleteness when it comes to financial education that makes 80 per cent of young people believe they will never achieve financial stability. According to a study by UK youth, the average family in the UK helps out young adult children with about £1,416 per year! This kind of financial behaviour, reliance and lack of education could be tackled early, these are just a few tips that could help you practice better financial planning and set yourself up for a better future!
Always Bear Your Credit Score In Mind
Your credit score is the thing that lenders and mortgage brokers use to assess your creditworthiness. It is calculated on a number of things and some companies are changing how they decide to lend to people, to be more inclusive, but as it stands, the majority of companies will focus heavily on your ability to pay your bills and repay any debt. If you meet all of these on time, you should start to build up a good, trustworthy credit score which could mean you get access to low-interest (or cheaper) credit in the future.
Reports show that ‘young people are still most likely to resort to high-cost credit’, such as short term loans. All financial products could negatively impact your credit score if you are unable to meet the repayments. More and more, young people are using this kind of high cost short-term credit, perhaps because they do not know where else to go for credit.
You can take steps to build up your credit score. A quick couple of tips include:
- Make sure you are registered to vote — appearing on the electoral register will confirm your details and make you visible to lenders, which can help to build trustworthiness with creditors.
- Check your file — you can use free, online tools or apps to check your credit score and get a copy of your credit report. This could help you identify any errors (unfortunately, they happen), like payments that companies erroneously believe you have missed.
- Pay your bills on time — to start building a credit profile, you can make sure your phone contract is in your name, coming out of your bank account, or any other small bills like this. It is vital you ensure you can afford the bills you commit to, but regular payments like this look good to creditors.
Start A Saving Ritual
Reports indicate that half of 22–29-year-olds have no savings. It is important that you establish a financial cushion that can be lent on in an emergency as early as possible, as this could prevent you from needing costly funding in the future.
Saving is a habit, just like anything else. It’s good to start as early as possible, even if you can’t afford too much. You can make your savings and your targets relative to your income. One of the best ways to save is to put money away as soon as you get paid. Try saving a percentage of your income, after all your bills have gone out.
If you still feel that putting away a lump sum every month is too unachievable, you could look at apps that work in conjunction with your current account. Every time you spend, your app can round up the transaction to the nearest £1, £5 or £10, however much you are comfortable with. From here, the money is put into a separate savings or investment account. Many people find this to be an extremely useful way to save, because they don’t even notice it. Although these apps make it easy to save, it is important to build up a consciousness around your finances, so that you consider saving a normal routinely practice. Your finances are not something that just happen to you — you can take control!
Workplace Pension Schemes
One other way to practice good saving, is to take advantage of workplace savings schemes. If you opt in, you decide how much money you wish to save every month and your employer will match it with a certain percentage. Thus, the more you save, the more they put towards your retirement, too.
In the current political and economic climate, we do not know what welfare help and state pensions are going to look like when the younger generation reach their greying years. A private pension like this could help to protect you with a little extra bounty in the future.
Take Note Of Your Outgoings
Just as important as making sure you save, is monitoring your outgoings. Learning your spending patterns and buying behaviour can help you limit frivolous spending in the future. Analysing where you spend your money will mean you know how to save money — the things you can cut back on, for example. This does not have to be as time-consuming as it sounds, there are apps like Money Dashboard that can handle most of this for you. You can set categories within the app, for example, ‘eating out’, and all relevant transactions will accumulate there, so you can keep track of your total spend on a monthly basis.
Moreover, it’s important to keep track of your outgoings to ensure you are meeting all your repayment dates. This could help avoid any bounced direct debits or attempts at collecting money that could affect your credit score in the future.
Taking care of your financial future does not have to be as daunting as it might sound. It’s all about small habits and building awareness to the things that impact you, that could help you achieve financial stability and your life goals in the future.