Being in my 30s, I feel like my relationship with money is now pretty sound. However, this is only after spending many years making up for the financial mistakes I made in my late teens and early twenties when I first entered the world of employment and thought money grew on trees!
And while I can’t go back in time and start my financial journey fresh with the knowledge I’ve gained (though, how cool would that be!) I can share what I’ve learned and hopefully stop others from making the same mistakes.
So, read on to find out what I wish I knew when I was young—the 6 money lessons I wish someone had sat down and told me that would have saved me from making some pretty big financial mistakes!
Money Lessons I Wish I Knew When I Was Younger
1. Budgets Are Important!
I get it – creating a budget is probably at the very bottom of the list of desirable things to do, but if I could go back in time 20 years, it’s one of the first things I’d make my 20-year-old self do.
Budgeting – knowing where your money is coming from and where it’s going each month – is so important if you ever want to achieve your financial goals, and it really helps to build a solid financial foundation for the future.
Also, it’s a lot easier to live within your means and not allow things to get out of hand financially when you are adhering to a budget.
This doesn’t mean living the life of a nun – things like going on holiday, going out with your mates, eating out at nice restaurants…all this is still possible, of course (provided you’re making the money for it!).
As long as you’ve budgeted for things like fun events, you’ll still have money at the end of the month for boring grown-up necessities like bills, rent and council tax!
Luckily, there are plenty of budgeting apps available that help make sticking to a budget a doddle.
2. Have An Emergency Fund
How I wish that someone had told me at a young age that as soon as I started earning money I should stash some of it away in case of emergencies.
Instead, I did what many twenty-somethings do and spent every last penny I made, leaving nothing left over after bills and frivolities.
I definitely learnt this lesson the hard way after having to borrow money to fix a boiler that decided to go kaput right in the middle of winter!
If you can, set aside three to six months’ worth of living expenses in an account that’s easily accessible.
That may be tricky to achieve at first, but start by transferring money from your current account into a savings account each month and the money will soon build up.
Download our free guide on how to build an emergency fund in 6 months (even on a tight budget)
3. Credit Cards Aren’t Free Money
For most of my twenties, I managed to talk myself into believing that credit cards were free money.
With a credit card in hand, I could do all sorts – go where I wanted, buy what I wanted…yes, I really was living life with my eyes half shut, reluctant to face the truth!
In fact, credit cards are anything but free. If you do what I did and just pay off the minimum amount each month, you’ll never pay off your actual balance; you’ll just be paying off the interest on that balance.
My advice would be not to bother with credit cards at all. It’s much more important to learn to live within your means.
Related: The Complete Guide to Credit Cards
4. Save For Retirement
When you’re under 25, it’s difficult to even conceive of a time when you’ll be anything but sprightly and young. However, we all age, and there is no better time to start saving for retirement than when you’re still in your youth.
Doing so now will mean when you do retire, you will be nicely set up.
Plus, it’s easy to do: many employers offer pension plans in which you save money directly from your paycheck, and, if you’re lucky, sometimes employers even top up pensions as part of benefits packages.
If your company doesn’t offer a pension plan, you can simply set up your own and pay into it every month. It’s worth looking into Lifetime ISAs as well, which were introduced by the Chancellor in the 2016 Budget.
Anyone under the age of 40 can use a Lifetime ISA to save for their first home or for retirement, and the state will add 25% on top. That way you get £1 for every £4 saved.
Related: Lifetime ISAs: What You Need To Know
6. Bank Advisors Are Not Your Friends!
It took me a while to realise that the lovely friendly people at the bank were actually salespeople.
The job of a bank is to make money, and so a bank advisor’s job is to use the typical sales tricks to get you to buy – and this is always easiest to do by being friendly!
Therefore, it’s important that when you open up a bank account, you are forearmed with the knowledge that your bank advisor will probably do their best to try to flog you a credit card as well.
Their hope is that you won’t have a clue about credit cards, like many young people, and that you won’t pay off your balance in full each month and will end up instead paying off some of the spiralling amount of monthly interest instead (see point 3!)
Just decline any extra offers and stick to your guns and you’ll be fine.
Download our FREE personal financial planner to help you track and achieve your financial goals.
6. Giving is Good
While it shouldn’t make sense, it’s often said that one way of becoming better off financially is to give to others.
And, even if it doesn’t make you rich, there isn’t much else in the world that feels better than doing things for others by giving, whether that is buying the stranger behind you in Costa a cup of coffee or leaving an extra-generous tip at the hairdressers.
What About You?
What would you tell your younger self about money? Have you had any financial mishaps that you wish you’d been warned about beforehand? Or do you already have plans to achieve your financial goals? We’d love to hear from you!