October 7, 2023

10 Financial Tips for Young Adults

Being a young adult can be hard. You’re trying to establish a career, navigate changing relationships and settle into the lifestyle you want. Among all this, you also have to think about money. We have put together ten financial tips for young adults to help you feel in control of your finances even in the middle of a fast-moving and frequently changing life.
Young Adults and Finances
According to a study from The Money Advice Service, one in five young adults aren’t confident in managing their money and 85% say that they wish they’d been taught more about money management at school or university.
It can be really hard to keep on top of money and feel in control. Sometimes it does come down to self-control, but that’s not the only way to manage your finances: planning, automating payments and comparing prices are just some of the ways to help you feel more financially in control.
10 Financial Tips
These top ten financial tips for young adults will help you to manage your money and feel confident about your finances. A lot of them are as much about planning for the future as for feeling confident month-to-month.
1. Budget
It might seem basic, but the importance of sitting down and creating a budget can’t be overstated. There are loads of different ways to budget, but all of them come down to looking at how much money you have coming in and therefore how much you can afford to spend on different areas of your life.
It’s absolutely essential for money management and financial stability. A lot of people take the 50/30/20 approach: 50% for essentials like rent, bills and groceries, 30% lifestyle spendings like clothes, meals out and similar, and 20% into your savings. This method is definitely not the only one you could take, but it can be a good place to start.
When you create your budget, be realistic about your income and distribute it wisely so you can always afford essentials while still having money to spend on fun things and add to your savings.
2. Create an emergency fund
It’s good to start saving for an emergency fund which you don’t spend unless you have to. Ideally, this will be equal to one month’s pay check so if anything sudden and unexpected arises, you have money to cover it.
It can be a good idea to save towards your emergency fund when you first begin earning. Once it’s established, save money in a separate account so you don’t accidentally use your emergency fund for a holiday!
3. Track your spending
Keep an eye on how you’re spending your money. It can be easy to lose track of what you’ve spent, look at your bank account towards the end of the month and be shocked at what’s left!
There are various ways you can keep track of your spending. Monzo is a popular choice. They’re a bank with an app that sorts your spending into categories so you can easily see what you’ve spent your money on. There are loads of other apps out there that could help. You could also get out cash at the beginning of the week and spend that rather than using your card to help you keep track of what you’ve got left and what you’ve used.
4. Plan your meals
You’d be amazed at the way this impacts your finances. You’ll probably find that a significant portion of your budget goes into your grocery shopping. Planning your meals in advance means that you only buy what you need when you shop, reducing waste and cutting down on unnecessary costs. It also means that you can buy your week’s shop from a bigger supermarket in one go, rather than a more expensive local convenience shop throughout the week.
5. Compare prices
Be wise about who you’re spending your money with; in a lot of cases, you might be able to get a better deal with someone else. Compare different prices for your electricity and gas bill, your car and house insurance, and even where you shop for your groceries. You can often save a lot of money by switching to a different provider or to a different shop!
6. Get a credit card — but use it wisely
A good financial tip for young adults is to start building your credit score early. It takes time to build up a good credit score, so this is going to be so useful when you’re looking to get a mortgage in the future or buy a car on finance.
The best way to do this is often by getting a credit card. However, you want to use this wisely so as not to get into unnecessary debt. Only spend money on credit that you know you already have, then try to pay it off before the end of the month so you’re not charged any interest. Read more tips on the best ways to use a credit card!
7. Pay off high-interest debt first
Lots of young adults find they have debt for various reasons. This could be anything from student overdrafts to payday loans, but when it comes to paying it off, it’s really important to prioritise. You should always pay off high interest loans first. If you’ve gotten anything like a payday or short term instalment loan, then you should always pay these off first.
Planned overdrafts often have low interest rates, so can wait until you’ve paid off higher priority loans. Student loans are a different thing entirely; you pay it off according to how much you earn — and currently don’t start paying it until you’re earning at least £25k. Don’t prioritise paying off student loan debt until you’re earning the required amount and even then, it’s usually advisable not to pay any extra towards it.
8. Avoid co-signing
Avoid getting into a financial relationship with anyone as much as possible, from co-signing to help a friend with bad credit to joint bill payments. The exception is obviously situations such as getting a mortgage with your spouse!
If you co-sign a loan to help a friend with bad credit, it means that you’re liable if they can’t make a payment. When you get into a joint financial obligation with another person, their credit score and payments will affect your own. It’s much better to keep things seperate if you can.
9. Cancel subscriptions you don’t use
Whether it’s a gym membership despite the fact you’ve only been once, or that subscription to Amazon Prime that you barely use, cancelling subscriptions can save you a lot of money without much effort. You can then use that money for other things or put it into your savings.
10. Future planning is important
Don’t underestimate the importance of saving for the future. According to the Money Advice Service, the vast majority of young adults only consider short term savings and don’t plan ahead more than 12 months.
Your emergency fund is part of this, but so are retirement savings or opening long term ISAs that will mature a long way down the line. Once you turn 22, a certain percentage of your earnings should go into a retirement fund automatically. This will turn up on your pay check, likely under the name of the pension organisation that your workplace uses. You have the power to change this amount by contacting the organisation, but it’s a really good idea not to reduce it.
You can look to portion out your savings. Perhaps put some aside for short term savings, like a holiday at the end of the year, and some into long term savings, like an ISA. If you’re married or in a long term relationship, you could split your savings with your partner into different places for different purposes.
As a young adult, managing money can be hard, but these financial tips could help you to feel more confident about budgeting and thinking about your financial future.

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