The Stupid Truth Suggests: Saving Money in Your Twenties

Trying to describe what life is like in our twenties is a little like trying to ride a bike, whilst blind-folded, whilst juggling swords, whilst doing a headstand. There is no real way to explain it.

As soon as we hit our twenties we suddenly feel the weight of age-related burden and expectation on our shoulders. And not forgetting to mention that our loved ones will often start asking those all-too-annoying questions that we all love to hate. As well as the swirling doom of figurative disappointment, our finances and stability are by no means settled either. For example, if we choose to further our education then we practically enter our early twenties enshrouded by debt, which can be daunting to think about.

Truthfully, so many of us believed we'd have our lives set out by the time we turned twenty-five. Who can blame us for having such high expectations? After all, our grandparents and parents seemed to have some form of financial stability by then. However, just like any generation, those family members and friends who grew up in different eras would have had some form of hardship and struggle that we may not be aware of. These are also completely circumstantial.

As our generation is very aware, especially at the moment, the under-thirties club is filled with low-income salaries and rarely-reviewed wage packets. If our aim is to save in order to achieve our goals, then it is true that we struggle to do this. Of all the generations, we are also quite clued up on our impacts on the environment, as well as the evolution of the digital age. Therefore, we are quite mindful of our decisions and conscious on how we need to achieve our goals. Effectively, we are problem-sorters trying to survive in an economy that isn't geared for our level of thinking.

Rest assured, there are still ways we can save consciously.

Don't compare generations

Did you notice that I only referenced our perceptions of the elder generation? This is because we actually don't know what life was like for our parents and grandparents in their twenties. We also know that due to growth in technology and evolution of the digital age that our childhood experiences are not something that any other generation can share. In fact, we all have our own understanding on what childhood actually is and none of us are wrong about it.

Without a doubt, considering how "easy" it was for the generations before us to buy a house is certain to make us feel down. Although we have a preconceived idea of what it was like, perhaps it would do us some good to have the conversations with our families about their own experiences. Sure, there may be a reason why our parents bought a house at twenty-three, but there could also have been a number of variables that allowed them to do so. Having a discussion with your relatives may also open their eyes about your situation too. You don't know until you try.

Another important point to note is that you shouldn't stretch yourself thin if you can't afford to save as much as others think you should. At the end of the day, you need to be able to enjoy your standard of living and not just survive it. Ignore others when they claim that our generation spends more money on smashed avocado and have put ourselves in debt because of it. This is a completely false and unfair judgement on us. Rather, learn what you can save in a month and what you need to earn to have the facilities you need. Simple calculations and an excel spreadsheet can allow you to comprehend everything you can afford.

Forget your student loan

Since our playground days of swapping Pokemon cards, we have now developed into adults that play Top Trumps in regards to our student loans. Do we even know what they are or how to talk about them? We know they aren't like a regular loan or debt and that - supposedly - it should be wiped after so many years. Deep down, we are all quite sceptical about what the fate of our student loan actually means.

Rather than fretting and panicking about whether our student loans will cause a lifetime of financial issues and hinder our ability to buy a house, it would be more worthwhile reading up on what it actually means. Martin Lewis, the nation's most trusted money man, has debunked a lot of myths regarding our loans. His column is regularly updated and includes a video to explain it all too. Check out his student loans myth-busting advice.

Considering your student loan, as well as other people's perceptions on what your finance means will allow you to be in the right mindset when preparing to save. Unfortunately, our judgements and expectations can be clouded by someone else's experiences. Therefore, we end up with unrealistic ideas on how much money we should be earning, and what we should be able to afford.

Study those saving accounts

Every December I make a point of checking the available savings accounts and the best offers around - sad, I know. However, three years into arranging my savings properly I have managed to build up my accounts. How did I do this? In truth, it wasn't easy and I had to start from nothing to get something.

If you are someone that has £100-£200 of disposable income a month (income not used on essentials), which I am also, then you need to review your expenditure before you set money aside to save. You don't want to completely drain your account in case any unexpected, expensive costs occur. Instead, you could set a direct debit to any easy access saver - that doesn't have a minimum deposit per month - to start building up your finances. Why does this help? If you start saving £10 a week and need to take some money back, you won't be penalised for doing so. The money is easy to reach when you need it and the process to put it back in is simple.

There are also apps and bots that can help save your money for you. Savers like Plum and Chip review whether you have money in your account that has stayed still for a large period of time. Luckily, before they save any payments into your saver they notify you. This also means you can cancel the save at any time if you actually need the money for other expenditures. Over time, as your account accrues more and more money, you can start transferring into higher savings accounts to build up your savings even more.

You can set yourself a goal to save £300, for example, and transfer half to a higher rate savings account. Even if the higher rate account is an easy access, if you can treat it like it is locked then you're less likely to take from it. However, I do believe that the first year of savings should be based around easy savers. Why? Simply because you never know how much expenditure you may have, especially if you have just started full time work and live independently. As we are so fresh on the job market, it's unlikely that we'll have years and years of savings behind us. Therefore, having access to Easy Savers may be more essential for us than at other ages. Admittedly, we do have more expenditures: rent deposit or mortgage deposit - if you can -, car and vehicle maintenance, season tickets for travel, insurances etc.

Spread out the costs

There is no need to be a hero when all of your bills are due. It's no secret that the month that you move will be the most expensive; the anniversary of your move will also cost you too. This is the time where all your home related insurances, expenditures and bills are renewed.

What costs should you spread across the year? Some services will charge you a little extra to pay monthly, but these won't be hundreds more. However, if you spread all costs out across the year, it could end up costing you a hundred or so more from all your utilities and insurance payments. Unfortunately, for a lot of us this is the easier option than paying everything in full straight away. If you need to do this then make sure you check what consequences there are for paying monthly. Some companies might put APR on monthly repayments too; check these in case you end up spending a lot more. It may be easier to pay for that service annually using a 0% credit card to balance out the repayment, that way you can still pay monthly (check when your 0% runs out though) and not need to pay any additional APR on top.

Super handy tip #1 - pay your TV license monthly. This won't cost you any extra and you won't pay any APR either. There is no need to pay this annually if you need to spread the cost out.

Super handy tip #2 - sign up for Martin Lewis' Cheap Energy Club. Why stick with a fixed rate when you could be getting a cheaper deal? The Energy Club will notify you when another company comes on the market that will charge you less for your consumption. Some accounts, like Igloo, will also give you cashback and grant you interest on the amount you have in credit. Changing to the best energy suppliers often (as long as there are no exit fees) will help you keep on top of your bills.

Super handy tip #3 - 0% credit cards are great, but you need to keep on top of them. If you use a credit card to buy food and petrol then each time you pay it off (or the minimum) you will be strengthening your credit score - something you need when purchasing using finance or applying for a mortgage. For example, 0% credit cards can also be used to put a deposit down for a car, allowing you to pay off the deposit in stages. This particularly helps when you don't have the savings to make a vital purchase. Before you invest, make sure you do your research on the product. You don't want to get yourself into a debt you are not able to pay off.

Super handy tip #4 - set a date in your diary every year to review savings accounts that are within your reach of use. There is no point sticking with a low interest rate if there are better choices out there. Some accounts (easy access) have been known to give you 2%. Fixed accounts can often give you more. Check whether your account has a minimum or maximum monthly deposit too as you don't want to cap your savings too low, likewise you want to be able to afford each monthly deposit.

Super handy tip #5 - discount portals and opportunities for saving/cashback. All Lloyds customers with a current account can take advantage of their Everyday Offers scheme. If you shop at one of these retailers you can expect some cashback from your purchase, as long as you activate the offer. Similarly, some of your friends and family may have access to discount portals via their insurance or work. There is no harm in asking them to purchase a voucher or product on your behalf to receive a good deal. The savings might be small but over time they will add up.

Super handy tip #6 - if you do have some savings and a little bit of debt, use your savings to pay off your debt. Although it might seem frustrating to do this, it allows you to keep on top of your debts and avoids taking from your current account if you need the money for other purchases. The likelihood is that you will have earned interest on your savings so won't be left without, similarly by paying off your debts it can help to boost your credit score.

The first year of saving can often be hard. I felt as though my savings would never increase, particularly at the beginning. Truthfully, saving takes time. Once you get to grips with all the tricks and tips you'll soon find your feet. Having several savings accounts open (aside from ISAs) can often work in your favour too. Taking from a savings bot and putting it in a higher rate savings account can help you to build your finances. It will just take time.

I'll follow up this blog post with another soon on how to make your savings work for you.

Moral of the savings story:

  • Try to ignore outside influences telling you how much money you should have

  • Look at how much money you can save at the end of every month

  • Asking for help or advice is more beneficial to you than you realise

  • Make sure you read the small print and requirements