Building Financial Confidence in Young Adulthood

Living in the UK is expensive. And young adults can face a steep learning curve when they start managing more of their own finances. For parents, helping teenagers and young adults develop good money habits can give them a stronger foundation for independence. Picking up the right habits now can help them to be financially secure in the future. Rather than focusing on the gloominess of the economic outlook, it’s worth looking at the practical habits that can build financial confidence early. This isn’t just a matter of finding a high-paying job but of laying the foundations for their finances through a number of practical steps.

Learning to Budget for Real Life

If they don’t know how to budget, then the chances are good that they will run into difficulty when it comes to money.  If they don’t track their income and expenditure each month, they run the risk of spending more than they can afford.

Your first priority, then, should be to help them learn how to budget. To begin with, this can be as simple as you like. Do it using a pen and paper, and then, when you’re comfortable, move to a spreadsheet or a specialist app. By tracking essential outgoings like rent and groceries, and subtracting any savings, they can get a basic understanding of how much they might need for everyday luxuries. At first, there may not be a lot of regular outgoings, but as they grow up and move out, they are likely to see a dramatic increase in these bills. Learning the basics prior to moving out should help them prepare for greater financial independence. 

Building Good Financial Habits Early

The right habits are best formed as early as possible so that they don’t end up forming the wrong ones. Setting up an automatic payment from a current account to a savings account is a good tip, so that they don’t get tempted to delve into the latter. Make sure that they understand the importance of paying off any credit card debt in full each month so that they don’t get stung by interest payments. When they start driving, think about all of the costs associated with that and how they might be covered. Looking into the cost of learner driver insurance in advance, alongside other costs such as fuel and even driving lessons, can help them to budget more realistically.

Understanding the Cost of Independence

When they head out on their own, you might find that the cost of living comes as something of a shock to them. Needing to be able to cover everything from transport and insurance to streaming services, gas, and electricity can add up quicker than expected. Some of these costs can be mitigated; others can be sidestepped entirely. What matters is that you’re making them aware of the bills they are likely to be paying and that they have the ability to come up with a plan for dealing with it. In certain cities, for example, there are options to elect to forgo a car entirely and rely on public transport instead.

Setting Achievable Financial Goals

When you first start to set savings targets with them, it’s tempting to dream big. But at the same time, you’ll want to ensure that everything is sustainable. If they end up demoralised, then you might find they end up cheering themselves up with an expensive luxury. Or simply giving up on the idea of saving for the future entirely.

In other words, it’s important that your goals are measurable and realistic. Remember that even small savings made at this point will grow over time, thanks to the power of compound interest. In other words, everyone should pay themselves enough to enjoy life and save an amount that they’re happy with.