What key money advice would finance experts give to their younger selves?
As students prepare to head off to university, finance pros share their insight and wisdom.
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Your support makes all the difference.Many young adults will be getting their first real experience of financial independence this autumn, when they head off to university for the first time.
Managing a budget – especially one that’s often very finely balanced as a student – can be tricky. And no one is perfect – in fact most people, even ones who are very money savvy, have made occasional financial mis-steps in the past that they’ve learned from since.
To highlight some potential pitfalls, and help young adults who are developing their own money habits, we asked finance experts to share their own past experiences, whether they were good or not quite so positive…
Learn to be savvy
Myron Jobson, a senior personal finance analyst at interactive investor, says: “The advice I would give my younger self is to be more money savvy. I often found myself in the red because I didn’t budget effectively. During my university years, my endeavours to live ‘my best life’ took a significant financial toll – I maxed out my overdraft.
“As the ‘Bank of Mum and Dad’ wasn’t something I could rely on, I ended up getting a part-time job during the crunch point of my education to clear the overdraft. Thankfully, I managed to balance my university and work commitments, but my money mismanagement put me in a completely avoidable situation.
“I’d often buy textbooks brand new, when I could have bought them second-hand or sought ‘hand-me-downs’ from recent graduates. I was also terrible at seeking student discounts. Notably, I bought a laptop from a vendor that offered a 15% student discount. In pounds and pence terms, it would have resulted in savings of £150 on a purchase of £1,000 – not an insignificant sum, especially for a cash-strapped student.
“Also, student discounts aren’t always made obvious by companies, so often students need to ask the question.”
Shopping for refurbished tech can lead to significant savings, and you may also find you can save even more money by clicking through from a cashback website.
If you’re likely to need to dip into your overdraft, it’s also worth comparing student accounts to find out how big a zero-interest buffer you may get with each one.
Budgets are your friend
Sarah Coles, head of personal finance at Hargreaves Lansdown, says they key when managing money for the first time can be not to panic.
“When I first moved away from home, I was so worried about busting my budget that I made some very anti-social cost-cutting choices – like washing my clothes in the bath rather than pay for the launderette, and not putting the heating on until all my flatmates had complained,” says Coles.
“If I could, I’d tell my younger self that there was no need to panic. I should have drawn up a budget, prioritised the essentials, and then worked out where I could cut costs without freezing my flatmates.
“I only got to grips with debt after I finished studying. Until then, I considered my overdraft to be my money to spend as I wanted. It was only when my first proper pay cheque didn’t even bring me back to zero, and I checked the interest I was paying, that I realised it wasn’t mine at all.
“I was quite annoyed that I’d somehow set my finances up so that the only one to benefit from payday was my bank. I went on a fairly extreme debt detox at that point, and any time I’m tempted to spend money I don’t have, I remember just how frustrating it was to live in the red.”
Top up your income if you can
Rachel Kerrone, personal finance expert at Starling Bank, says she found that a waitressing job really helped to boost the amount of money she had to spend as a young adult.
And even if you end up having to miss the odd night out, she adds: “It’s better to never borrow money in order to spend, as doing this could put you into debt very quickly without you realising.”
If you manage to have any surplus cash left over, starting a savings habit could also pay off.
Kerrone says: “By setting aside or investing even £20 a month when you’re aged 18 or 19, you’ll be able to gain a better amount of compound interest than if you started later. However, if you’re considering investing in anything, always remember to only invest both what you can afford and what you’re prepared to lose.”
Start saving early
And while retirement may not be at the top of the priority list right now, saving into a pension as early as possible could turbo-boost your longer-term savings.
Alistair McQueen, head of savings and retirement at Aviva, says: “When we ask Aviva’s retired customers what one piece of advice they’d give to their younger selves, their top answer is always the same: ‘I wish I had begun saving earlier’.
“Saving a little earlier can make a big difference in later life.”