Budgeting can be tricky, and takes time to master.
New research suggests that young people, like students and graduates who have recently left home, are struggling significantly with their finances, causing their mental health to suffer.
The pandemic has been a catalyst for an already growing mental health crisis and young people have been the worst hit, according to research.
In a recent survey by Student Beans, 55% of university students cited money and finance as their biggest worry.
Plus, new research by home insurance company Urban Jungle found that 27% of private renters aged 18-35 are struggling to stay within their budget post-pandemic.
In a survey by the Healthcare Workers’ Foundation, taken earlier this year for Mental Health Awareness Week (MHAW), nearly half of 18-24-year-olds said their mental health had become ‘significantly worse’ since the first lockdown, with 45% choosing the worst mental health outcome on the survey.
This explains why more young people are calling for more education around money and finances.
Although it takes time – and a lot of willpower – learning to manage your finances can be simple.
Lewis Potton from Student Beans has shared four useful tips for young people looking to start managing their finances.
How to start looking after your finances
Avoid unnecessary overdrafts
Dipping into an overdraft when you’re low on cash can be very tempting, especially when all your friends are off on a night out or a new pair of trainers are dropping.
Even though banks offer periods of no interest rates to students and graduates, paying off your overdraft can become a serious financial burden, especially when you’re coming to the end of that period.
According to Student Beans, 45% of young people with an overdraft now owe a whopping average of £1615 of overdraft debt. On minimum wage, this could take up to 200 hours’ worth of work to pay back – and that’s before accounting for other expenses, like rent.
Instead, Potton suggests budgeting each month for the things you’d consider dipping into your overdraft for.
‘That spontaneous night out might seem tempting at the time, but if you know your finances are running thin and you still have bills to pay, it’s probably not going to be worth it,’ he says.
‘Instead, assess the money you do earn and set aside a specific amount of money a month to go towards this kind of expense.
‘This way you have a good indication of what you can and can’t afford.’
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Avoid overusing credit cards
Similarly, credit cards can seem like a great idea – and boosting your credit score is important.
But it’s only a viable option when you can be sure you’ll pay the money back.
If not, you could end up with large sums of debt and a poor credit score, which can have long-lasting effects.
Here, budgeting apps such as Monzo can come in really handy.
‘You can use apps like Monzo to put small amounts of money away each month into specific pots for events like festivals or holidays,’ says Potton.
‘This was you can gradually chip away at large costs to put less financial strain on yourself, whilst also planning ahead to know what you can and can’t afford during more social periods like summer.’
Live by the ‘50, 30, 20’ rule
Budgeting can be difficult, especially when you’re new to it.
It can be hard to know how much to put away for what each month.
Potton suggests adopting the 50/30/20 rule.
He says: ‘Half of your income should go towards necessities (rent, bills, groceries), 30% on discretionary and leisure (clothing, takeaways, events, gym), and at least 20% should go towards savings – to ensure you’re financially equipped for any unexpected expenses.’
Take advantage of discounts
Finally, if you’re a student, make sure to take advantage of any discount you can.
You’ll be surprised how much small savings here and there can add up.
This tip can also extend to graduates and other young people who don’t have access to student discounts.
Potton says: ‘Even if you are no longer a student it’s important to shop around before making big purchases.
‘If you’re planning a trip away or looking for a gift for someone special, check out sites like Very and Wowcher to find better deals than you will on the high street.’
If you want more tips and tricks on saving money, as well as chat about cash and alerts on deals and discounts, join our Facebook Group, Money Pot.
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