What young people need to know about finance

Learning to make good financial decisions early on can make a big difference when it comes to major milestones and life stages, like buying your first property, getting married, raising a family and enjoying a comfortable retirement.

You need to control your money

If you don’t learn how to manage your money early, you could miss out on things like tax breaks on savings accounts or pension contributions that could make a big difference to your finances later in life. Talking to an adviser will help you understand the basics of good financial planning.

Learn to control your spending

It’s important to remember that credit card debt is effectively spending your future income before you’ve earned it. Yes, credit can get you the things you want instantly, but you have to pay it off at some point. You need to ask yourself if you really need to pay interest on non-essential purchases.

Know where your money goes

You’ll need to show you can budget if you want to get a mortgage. Lenders operate stricter criteria these days, and before they lend, they will want to know where your money goes, how much you save, and how much you can afford to pay each month in mortgage repayments.

Drawing up a budget now will help you keep an eye on where your money gets spent. That way, you’ll know how much your morning coffee costs you each month, and how much you can save towards life’s big financial milestones, like getting a deposit together for a house. The more deposit you have, the better rate you’re likely to get on your mortgage.

Start a fall-back fund

Make sure you build up an emergency savings fund. If you can get into the habit of saving money each month, and making this a non-negotiable commitment, then the sooner you’ll have a financial buffer against life’s financial ups and downs.

Retirement planning from day one

Whatever you do, you should start saving for your retirement as soon as you can. Einstein called compound interest ‘the eighth wonder of the world’ and it can work for you. The younger you start saving into a pension, the better the chance you have of accumulating a reasonable pension pot when you retire. Put simply, the later you leave it, the more your pension will cost you.

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