Millennials make up the largest percentage of the workforce in the UK, with over 17 million people in the age group.
For many young people, financial planning is a vague concept that encompasses their loans and the day to day expenses. For those who are a bit more finance savvy, terms like APR and principal might make a lot more sense than to the average millennial in the workforce (or even those still in university). You start making all sorts of financial decisions before you even get your first full-time job, and by the time you have a substantial amount of money, some of your financial dirty laundry, so to speak, may have started to stink a bit.
The average working person can save up to thousands of pounds in saving by making more sound decisions regarding their finances across the span of their careers. We know what you’re thinking, it’s all fun and games until you’re faced with the dilemma of having to decide between a savings account that pays a fixed sum against your balance every month (or year) or a percentage-based system. But you don’t need a degree in Finance to know what the right choice is, instead all you need to know is learn a few tricks that will go a long way.
Financial planning for millennials can be especially terrifying with the current economic instability, and it’s important to stay in top form to make the best of what you have. A financial cheat sheet can be a great help in getting you out of that confused, ignorant slump about how your finances work. Here’s some of the stuff that can make financial planning for an average millennial much easier, no matter what they’re working with.
1. Know what the words mean
Financial nomenclature and jargon can be a bit intimidating, and most people miss out on what they’re really dealing with just because they cannot understand some of the terms. This can lead to a gap in your information, which would otherwise allow you to make better financial decisions based on your current financial situation. (Which reminds me of another important tip, to always know your options, but that is a conversation for another time.)
Get to know what words like stacking and AIR mean, and don’t be afraid to ask questions. The internet can be a great help, with the numerous resources available today. Resources for financial planning for a millennial (aka you) are a lot more accessible due to the internet and ease of communication with the people who can actually help.
2. Use your resources (wisely!)
It’s important to know what kind of help is available and how you can access. Numerous charities and private organizations provide courses, and guidance on how to create a better, more improved financial plan, especially for millennials, who are young in their careers.
Use resources easily available such as apps, any special discounts, and tax-free investments towards your pension to create a more sustainable model for your money to work out.
The National Numeracy challenge is an example of such a resource. They have a free test for you to check your numeracy skills, and help you improve your numerical comprehension, to help you make more informed decisions. Their aim is to make financial planning for millennials easier, to create a healthier financial future for them.
3. Financial planning for millennials is a tough act, so make sure you know all the options available to you
With the future of pension a little uncertain, and companies matching employee’s 401(k) payments, things in the financial world are changing fast. And as a millennial planning their personal finances for the long-term, it’s important to catch up with all the changes you’ll face as you continue to invest and save. Make sure you’re getting interest that will hold up against the increasing inflation, and make informed decisions about where to invest, instead of following someone’s advice blindly. Look everywhere and research before you make a decision.
4. Ask questions whenever you can
While it’s important to do your research and make your own decisions when it comes to your finances, asking questions from your parents and sometimes even friends can be a great help, and lead you towards great alternatives to your current situation.
Sharing creates a healthy environment where you can learn about your finances without shame, and if you can get expert advice, it can allow you to understand financial planning for millennials in a broader perspective.
5. Bank on that compound interest
As you get your first pay check, you may feel the sudden urge to get the things you’ve wanted to for the longest time. If that’s the case, you need to understand the serious value of saving up as soon as you can. Most people suggest having an emergency fund of 3 to 6 months’ pay checks worth of money in case of medical or financial emergencies.
Compound interest means what it sounds like, that you get interest on your interest. The sooner you have a substantial amount in your savings account, the sooner you can start earning some of it back. That measly hundred pounds that you might want to spend on yourself could add up to form a big part of your savings’ fund. Believe us, you’ll thank yourself later.
Things to consider
That big old B word that seems to haunt your spending habits is a huge part of your financial planning for a millennial. It may seem unimportant whether you spend a hundred quid on a fancy dinner date, but it can make all the difference between having enough at the end of the month.
Paying off your credit in time
Whatever you do, don’t be tempted by that minimum due amount on your credit card receipt. Pay of every penny you owe unless the circumstances are dire, because ever payment you make counts towards your credit score.