Budgeting skills
At this stage, young people need to be managing a small budget, and we would recommend giving them an allowance that includes pocket money plus other items that they become responsible for buying (e.g. toiletries, clothing, lunches). This can initially be paid on a weekly basis, moving towards fortnightly and then monthly as independent living draws nearer. Paying the money into a bank account is advisable.
It’s a good idea at this stage for young people to look again at how they’re spending their money, and whether they could cut back on something and create some savings. The following document can help with this:
Future planning
Starting to look at money in the future is a good idea – both in terms of a personal budget for independence, based on their income and likely expenditure, and thinking about what items for their home will cost. They will get a setting-up-home allowance from their Local Authority to help with these things, but it’s likely to be less money than they need to fulfil all their desires. Getting some savings underway will help.
Financial responsibility
Young adults need to learn about financial issues for adulthood, including wage deductions (tax and NI), credit and managing debt. It is important to be aware of credit as young people become responsible for their own debts at 18 and can easily fall into payment difficulties:
Talk with young people about paying taxes and where this money goes. If they plan on being self-employed, they will need to be able to complete a self-assessment tax form in paper or online and might need help with this.
Talk with young people about ‘priority’ debts – those that can result in homelessness or jail. Examples include rent, council tax, employment taxes and government fines. Let them know where they can get help locally if they are in debt and cannot manage the repayments.
Talk about how there is a difference between ‘good debt’ and ‘bad debt’. Not all debt is bad – only that which you’re not able to pay back. Young people in employment might need to take out a loan to buy a car and this is OK if their job is secure and their salary sufficient to make the payments.
Young people should be wary of mobile phone contracts if they are on a low income or in insecure employment as these contracts typically run for 2-3 years and you cannot withdraw from them if financial hardship occurs.
Student finances
Young adults wanting to look at university options – or other training – should start thinking about the costs and planning how they are going to afford their living expenses. The following documents and websites will be helpful here:
