Bank, building society or post office accounts
There many different banks, building societies and the post office that you can choose from when opening a bank account to manage your money.
Most people use a current account to manage their day-to-day money.
It allows you to:
- pay bills by Direct Debit or standing order
- receive automated payments, such as salary, wages or benefits
- have an overdraft, although the bank will need to authorise this
- pay for things with a debit card and withdraw money from cashpoint machines.
To help you manage your money, you can:
- use the secure bank app, to check and make payments
- set up text alerts, to warn you of a low balance.
If you’ve dipped into your overdraft in the past, make sure you check fees and charges for going overdrawn.
There are many types of savings account that will have different conditions and rates of interest.
We recommend that you make an appointment with your chosen bank and talk to them about which account will suit you best. They have some account especially for young people.
https://www.fca.org.uk/publication/documents/everyday-banking-easy-read-guide.pdf
An overdraft lets you borrow money through your current account by taking out more money than you have in the account – in other words you go “overdrawn”. There’s usually a charge for this. It is better to have an overdraft level agreed with your bank if you think you might need it rather than just go overdrawn.
Debit, credit and store cards
Debit cards ensure the money comes straight out of your account. Credit and Store cards delay your payment. Make sure you are aware of the interest rate you will be charged as this is often high. Make sure you meet the deadline for payments to the account. They can be a good way of building up your credit score if managed well.
Your credit score is a snapshot of your financial history and may be considered if you apply for a loan or further credit.
Cash machines
Some bank cards allow you to withdraw money from a cash machine. There may be some age and amount restrictions. Be aware some cash machines will charge you to use them. You will be sent a PIN number by the bank in a separate letter, but you can reset this on the cashpoint machine. Never share or write down your PIN number
Budgeting
Whether you live with your parents or are striking out on your own, it’s never too early to start to budget. You need to look at your “income” whether it be an allowance from you parents, wages from a job, a student loan or money from benefits. You then need to list you “have to” outgoings. Your living expenses like rent and utility bills are probably your biggest monthly costs. Although it might not be possible to shop around for energy deals at the moment, you can still follow our tips to keep on top of your bills.
Wages
The hourly rate for the minimum wage depends on your age and whether you’re an apprentice. You must be at least:
- school leaving age to get the National Minimum Wage
- aged 23 to get the National Living Wage – the minimum wage will still apply for workers aged 22 and under
Apprentices are entitled to the apprentice rate if they’re either:
- aged under 19
- aged 19 or over and in the first year of their apprenticeship
Apprentices are entitled to the minimum wage for their age if they both:
- are aged 19 or over
- have completed the first year of their apprenticeship
https://www.gov.uk/national-minimum-wage-rates
Taxes and National Insurance
Income Tax is charged on most types of income. The most common way is on your wages and salary from work. You don’t usually pay Income Tax on all your taxable income. This is because most people qualify for one or more allowances. An allowance is an amount of otherwise taxable income that you can earn each year, without paying tax on it. Everyone, including students, has something called a Personal Allowance. This is the amount of money you’re allowed to earn each tax year before you start paying Income Tax. For the 2023/24 tax year, the Personal Allowance is £12,570. If you earn less than this, you usually won’t have to pay any income tax.
National Insurance contributions are a tax on earnings and self-employed profits paid by employees, employers and the self-employed. They can help to build your entitlement to certain benefits depending whether you are employed or self-employed, such as the State Pension and Maternity Allowance. Some social security benefits will be dependent on payment of sufficient National Insurance Contributions. You will have to pay National Insurance contributions if you’re over 16 years of age and earn or have self-employed profits over a certain amount. https://www.moneyhelper.org.uk/en/work/employment/how-does-national-insurance-work-and-should-you-be-paying-it
Benefits
If you’re looking for work or on a low income, you can check if you’re getting the right entitlements, including Universal Credit. Bear in mind that eligibility for benefits and grants may be different for 16–24 year-olds depending on your circumstances, including where you live in the UK.
If you have a child to care for, then check if you’re claiming all the support you can in our guides Help with childcare costs and What benefits can I claim if I’m pregnant or have a baby. You can also find out more about government help with childcare costs for parents at childcarechoices.gov.uk
If you’re under 18 and a young carer, you might be eligible for financial support.
If you’re aged 16 or 17 and a care leaver you may also be able to claim benefits to support you if you’re living independently.
Saving
Regularly putting money aside for your future life goals is a good habit to pick up. Even if you can only afford to save a small amount each payday, you’ll learn how rewarding it is to see your account grow. If you have savings to fall back on, you’ll be better prepared for emergencies, reducing your need to borrow money.
Child trust funds – If you’re over 18 and were born between 1 September 2002 and 2 January 2011 then you’re now able to access your child trust fund. These were opened with a free £250 or £500 contribution from the government when you were born. Even if no more money was added to the account, there should still be something there for you. There might be anything from a few hundred to over £1000 in your child trust fund.
Borrowing money, making payments and debt
It’s easy to think of a loan or overdraft as free money, but it’s actually expensive as you usually have to pay back the original amount plus interest. Try to only borrow money when you need to and repay it as soon as you can. There are many ways of borrowing money, including:
- borrowing money from family or friends
- having an overdraft
- taking out a personal loan or secured loan
- applying for a credit card.
When you borrow money, you are entering into an agreement to repay it in the agreed way. If you don’t do this, the lender is entitled to take steps to get the money back. If you are in debt and need support, there are some organisations that can help you:
- National Debtline
- Step Change
You should avoid companies that will offer to deal with all of your debt problems and talk to lenders on your behalf, as they often charge large fees.
Payday loans also attract large interest rates and should be avoided. There may be some alternative ways to deal with money problems.
Insurance
An insurance broker is a regulated financial adviser who specialises in general insurance. They are experts who will help you decide what type of insurance and level of cover you need and recommend a suitable policy at a price you can afford. They are paid by commission, and their professional opinion can be valuable if your insurance needs are complicated.
There are also Comparison websites to help you find the best deal on everything from gas and electricity to broadband and bank accounts.
You should consider insuring anything you own that’s important to you and you might find difficult to replace if it was lost, damaged or stolen. Shop around for the best deals, especially when you come to renew your insurance policies. There are many types of insurance you may choose to take out. You need to think about the “risk” of not doing so and it is your choice.
Car Insurance however is a legal requirement and not a choice. If you drive a car you must be insured to drive it even if it isn’t your car. You should take out insurance for your own car and check the small print for driving other cars. It is illegal to drive if not insured.
Contents insurance covers all your belongings so if they get stolen or damaged you can claim money to replace them. Policies have different conditions so read the small print carefully. You can even take this out as a student or if you live in a room in a shared house and it isn’t expensive.
Phone/laptop insurance– some people choose to take out specific insurance for their phone including for damage or getting lost or stolen.
Private Health insurance Your health needs will normally be met via the NHS and you should register with a GP. If you have a learning disability (LD) you can go on the GPs LD register and have an annual health check. However you may also choose to take out private health insurance which means you may be able to see someone quicker if you need specialist help. This is usually cheaper if you are younger but may not cover pre-exiting conditions.
Building Insurance is usually taken out to insure a building that you own and it must be taken out if the property is mortgaged. It is advised to have this if you own your home.
Appliance Insurance– Many companies offer insurance cover for appliances in case they break down. Most new appliances such as washing machines will have an initial warranty, but you can extend this cover if you want to. People usually do this if they don’t want a surprise bill but it does mean a regular monthly outlay.
Pet insurance – if you have a pet you may decide to have pet insurance to help cover larger vet bills. If you pet gets sick or has an accident bills can be very large so many people (especially dog and cat owners) will have insurance to help with the cost of unexpected vet bills.
Student Loans
You may be able to borrow money to help pay for university or college tuition fees and to help with living costs. You might get extra money on top of this, for example if you are disabled. You start repaying once you earn over a certain amount. The size of your monthly repayments will depend on how much you earn, not what you owe. You’ll be charged interest on the loan from the day you take it out. The terms and conditions can change. https://www.gov.uk/student-finance
Understanding your student loan: a guide for English students starting an undergraduate course 2023
Property and mortgages
Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.
Lenders will tell you how much you are qualified to borrow – that is, how much they are willing to lend you. Several online calculators will compare your income and debts and come up with similar answers. But how much you could borrow is very different from how much you can afford to repay without stretching your budget for other important items too thin. Lenders do not take into account all your family and financial circumstances. To know how much you can afford to repay, you’ll need to take a hard look at your family’s income, expenses and savings priorities to see what fits comfortably within your budget.
Costs such as homeowner’s insurance, property taxes, and private mortgage insurance are typically added to your monthly mortgage payment, so be sure to include these costs when calculating how much you can afford. You can get estimates from your local tax assessor, insurance agent and lender. Knowing how much you can comfortably pay each month will also help you estimate a reasonable price range for your new home.
Pensions
If you’re aged 22 and over, and earning over £10,000 a year, then your employer will automatically enrol you into a workplace pension. Even if you’re under 22 or earn less than £10,000 a year, you might still choose to start paying into your workplace pension.
Deputyship
Someone such as your parent may apply to become your deputy if you ‘lack mental capacity’. This means you cannot make a decision for yourself at the time it needs to be made. You may still be able to make decisions for yourself at certain times.
You may lack mental capacity if you have severe learning disabilities
A deputy will be authorised by the Court of Protection to make decisions on their behalf.
There are 2 types of deputy.
- Property and financial affairs deputy- for things like paying the person’s bill.
- Personal welfare deputy- for things like making decisions about medical treatment and how someone is looked after.