Wednesday 9th March 2022
What's it all about?
This article's designed to help you:
Are you within the 10%?
The UK really does have a problem to solve with how we’re handling our spare cash. 10% of us have literally no savings at all socked away, and over 30% have only managed to scrape together under £600 in total. A survey from 2020 showed that the average Brit had around £6,757 saved, while 2 in 5 couldn’t survive on their savings for a single month if they needed to - and honestly, that’s a pretty serious concern.
It turns out there’s an age factor that comes into play here, and it makes sense. The older you are, the more time you’ve had to pile up some spare cash. Baby boomers (people born from 1946-1964), for example, are at the top of the savings heap with an average stash of £9,758.54. Right up there with them are the so-called “silent generation” (born between 1928 and 1945), sitting on an average of £9,497.96 in savings. Meanwhile, down at the other end of the scale, we find Generation Z (born since 1996), who’ve only managed to scramble together an average of £2,530.71 so far.
Just from the raw numbers we’re seeing here, if you’ve successfully saved anything at all by the time you hit 21 it looks like you’re already ahead of the game. Of course, a lot depends on your personal situation, as a 21 year-old university leaver’s finances are likely to look very different from those of someone who went to work straight out of school. Either way, it’s clear that the earlier you start to save, the better your long-term money outlook will be.
Spreadsheets are your friends
When you commit to saving, you’re making a potentially critical investment on your own future, so starting young makes sense. Your early decades are a great time to get to grips with things like pension planning and basic budgeting. The trouble is, this isn’t usually the kind of thing they dig deeply into at school. Most of us are pretty much left to educate ourselves on simple money management. When you’re 21, pensions can seem like such a non-issue that they’re hardly worth learning about – much less paying into. However, having even just a rough idea of how the system works can be a major leg-up when you start working and building up a pension of your own.
So how do you kick-start some good savings habits? Well, the first thing to do is open up a spreadsheet. Don’t worry – that’s about as scary as this is going to get. We’re not expecting you to become an instant financial expert. Just open your sheet and start recording what you earn each month in it. When you spend money, make a note of that too. Pretty soon, you’ll have the makings of your first real budget plan laid out.
Remember that the small details matter. Every amount you’ve spent, no matter how small, goes into your spreadsheet.
Remember to record what it was you spent it on, too. You’ll quickly get a clear picture of where all your cash is going – and that’ll be important when you start to plan your saving.
Still living with parents?
Obviously enough, diving straight into paid work out of school can give you a bit of a leg-up on the savings front. If you can keep on living with your parents for a while, that advantage gets magnified since you probably won’t be hit so hard by “overhead” costs like rent and bills. In turn, that should give you more disposable income – and with it, more headroom to save money. Even so, you’re still going to need to get into those good saving habits if you’re hoping to make the most of your financial head-start.
We mention the “50/30/20 rule” quite often in these articles, and there’s a good reason for that. If you’re trying to save money in a simple and reliable way, then making good budgets is the key. If you haven’t already read our article, “4 Fixed Income Saving Strategies - Combine to Win!” then here are the basics. Divide up your income into essentials (50%), wants (30%) and savings or debt repayments (20%). Simple, right? Just stick to that and you’ll be well on your way to hitting your first savings goals.
Let’s look at some actual numbers next. An average 18-21 year-old in the UK earns £18,392 (for men) or £17,005 (for women). So, if we take the average of those, we get £17,698. Obviously, you’ve got your Personal Allowance and taxes to factor in as well.
Naturally enough, if you’re paying your own way for living expenses then your actual costs will probably look very different from someone still living at home. The same goes for people paying their own travel costs rather than getting lifts from Mum and Dad. It might turn out that your essential living expenses eat up less than the 50% of your take-home you’ve allocated to them, allowing you to save more. Either way, planning where each chunk of your income’s going is the core of good budgeting.
Keep checking back here for more money tips and updates. We’re experts at saving you cash and we’re always here to help. That’s the reason why you’re better off with RIFT.
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