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5 Ways Young Adults Can Manage Their Finances.

With a car stuffed full of bedding, cutlery and other essentials, my 19 year old son left home to set up home in his first rented property

Clearly excited about his new found freedom, I received little more than a cursory wave and a promise to ring me at least once a week - needless to say the only time he calls is when he needs money.

By the third month of living alone it was clear Joe was finding it difficult to make ends meet. So with the offer of a big breakfast and an offer to do some washing and ironing I managed to sit him down to explain how he could manage his finances more diligently. Personal finance Image

1. Self Control.
I’m referring to credit here. It’s easy to borrow money from a friend or purchase something on a credit card. But both want it back, the credit card with interest, and you need to make sure you pay it on time, and in full, or there could be repercussions.

Making small purchases on credit are fine as long as you are self disciplined and don’t add more before repaying the initial loan. And make sure that you get the lowest interest rate that you can!

2. Understanding disposable income.
Looking at your salary when it’s just arrived in the bank usually gives an impression of having a healthy account and money to spend. But it’s important to consider recent transactions which haven’t been debited and financial commitments for the month ahead.

3. How to manage emergencies.
Save. Having a cash reserve available really helps manage unexpected bills and emergencies – and as a rule of thumb, three months worth of expenditure provides a good safety net.  A cash ISA  might be a good choice here and will usually offer better interest than standard savings accounts, it also means you can access your cash if you need to.

4. Long term stuff.
If your employer has a pension plan join it. It may seem like a long way off but the earlier you start to make contributions the earliest contributions make the most growth and can make the difference between a decent retirement income or not. 

5. Buying your first home.
Buying your own home generally makes more sense than renting over the long term, so avoid rushing in to buy a house until you have established your earning power.  However if you’re ready to make that leap, then get professional help from a mortgage adviser.

By Lindsay Hopkins

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