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With the help of this guide, get into good money habits as early as possible to help set yourself up for a secure financial future.

We all have different attitudes towards money

Spenders - Some of us spend any money we have on impulse purchases and the little luxuries that we are used to. This makes it harder to make choices and save for bigger things in the future.

Savers - Others are used to going without the things they want, are better at saving and planning ahead.

Whichever category we feel best describes us - it's likely that our attitude towards money developed at a young age, and will remain with us, to some extent, for life.


Learning to think ahead

Simply getting by day-to-day financially without setting anything aside may mean you can afford a comfy lifestyle now, but is likely to cause various issues in the future.

Here are some tips to help you get into a good position financially and some bad spending habits you should avoid:


Avoid overspending!

girl with no money left

We buy things because we either need them or want them – buying things we want but don't actually need are emotional purchases that make us feel good temporarily, however the cost of these things add up and leave us with less or no money to save towards the things that will matter later on – e.g. deposit to buy a flat/house, further education costs, a car etc.

To avoid overspending, safeguard your attitude! So many young people work hard for their money yet are willing to spend so much of it on expensive clothes and other items. We spend so much time on social media which has made anxiety among young people a growing problem – people project an idealised version of themselves online, posting glamourous pictures showing they are enjoying themselves, often doing expensive things and we feel we should keep up. It is less usual to express money worries and other troubles online, so it’s no wonder you can get a distorted view of life.


Emergency Savings

Good financial advice tells us to aim to have three months savings that can be accessed quickly to cover unforeseen circumstances. If you don't have any other savings, opening an instant and easy access account would be a good idea so that if the car has a major problem, you can cover this type of expense without having to borrow money or leave yourself struggling until the next payday. These accounts may pay a little more interest than your current account, but the most important thing is to have some savings that can be accessed immediately.

If you want to save regularly and have access to other funds in the event of an unforeseen emergency, you may wish to consider a different type of account such as a regular savings account as they tend to offer much better interest rates.

Protect your credit rating! If you don’t have provisions for unforeseen circumstances, you may not be able to afford all of your credit commitments. Missing a credit card payment or paying a mobile phone bill late may not seem too serious. However, this will damage your credit rating, which is reviewed when you apply for finance in the future. Even if you are up to date with your payments at the time when you want a mortgage or other loan, the missed payments will stay on your report for some time afterwards and will affect your entitlement to the best interest rates for several years to come.


Interest-free overdrafts student and graduate accounts

If you are a student, be sure to open one of these accounts to benefit from an interest-free overdraft facility of up to around £3,000 whilst in university. After graduation, the bank will automatically convert the account to a graduate account and the overdraft is repaid gradually over a period of time. Since there is no charge for the overdraft, it is wise thinking to take the maximum overdraft available and place the surplus amount into a savings account. By doing this, you can actually earn some interest and then give the bank their money back!

To open a student account, you will be required to go into a branch or sometimes you can apply online and just take the documents needed into a branch. They will need one or two forms of identification and proof of address, such as a utility bill and also a letter of acceptance from your chosen university or a UCAS offer letter to prove you are a student.


Pension planning

The earlier you can start putting money into a pension the better, as it will have longer to earn interest and gives you more time to contribute. Better to look forward to retiring later in life with money to enjoy holidays than spend years in the future worrying how you will survive!

Contributing to a pension is a tax efficient way to save money for later in life as for each pound you pay in, the government tops it up with the money you would have had deducted in tax. This is particularly beneficial if you are a higher rate tax payer.

You can take out your own personal pension in addition to any pension you may have arranged through work if you’re employed (the law is changing – soon all employers will have to offer a workplace pension) this can be done via a bank, building society, financial adviser or some life insurance companies.

It is up to you how much you pay into a personal pension, however as a guide take your current age when you begin making contributions, half it and take that number as a percentage and pay in that percentage of your income.

For example: A 28 year old with an income of £2,000 a month may want to contribute £280 into his pension savings.

If you work in the public sector or for a large employer, you may have a defined benefit pension scheme. These types of pension pay a secure income for life, increasing every year you have paid into the scheme. It is possible to work out how much income you can expect each year of your retirement if you know how many years you have paid into the scheme, multiply this by your 'pensionable salary' (either your salary at retirement or your average salary) and then divide this by the 'accrual rate' (either 60 or 80).

For example: Someone who has been a member of the scheme for 10 years with a pensionable salary of £30,000 (10x30,000/80) will receive £3,750 a year.


Lastly, get control of your finances

girl at cash machine

The key to being in control of your finances is to familiarise yourself with your money – how much you have coming in and how much you have going out. Work out how much of your wage is disposable income to do what you want with by deducting all your outgoings, including travel costs, food, phone bill etc.

To help with this, you could set up a second bank account that you just use for direct debits. Pay all your direct debits from the one account and transfer enough money in there to cover these commitments each time you’re paid. Then if you only spend money that is in the other account, you should not ever fail to pay a bill on time.


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