You think homework and their hobbies are all young people should think about? Think twice! Your children’s late teenage years and early twenties don’t only create a valuable foundation for their education and later career, they’re also the years that see them making their first financial choices. And you want them to be smart ones, right?
To help young people understand the impact of a bad credit rating, Online Mortgage Advisors have created an interactive tool that allows young people to compare future mortgage rates depending on their credit rating as well as a list of useful tips on clever spending and responsible borrowing.
Why young people should think about their credit rating now!
According to research by student money advice website, Save the Student, students are increasingly relying on high-interest credit to get them through university with 83% of them using their student loan to finance their time at university, 43% using their overdraft, 12% having signed up to a credit card and 2% using a student loan separate or in addition to their government-issued student loan.
Those not at university are struggling even more. According to the Office of National Statistics nearly a third of 16-24-year-olds have financial debts, with half of them having debts of 40% or more of their annual income.
“Although teaching young people about managing money became part of the national curriculum in 2013, it’s clear more needs to be done to help young people realise the potentially damaging effects of getting into debt,” Pete Mugleston, Director at Online Mortgage Advisor added.
37% of 18 to 24-year-olds currently hold one or more credit card, have an overdraft and are owing a combined average of £2,989. The same number of people say they do not have a plan in place to repay the money they currently owe and 10% of those questioned admit to having missed at least one payment in the last 12 months.
“We think it’s vital that the UK finance sector gets onboard the Get Smart About Credit initiative, promoting awareness about the issue of young people and debt. Working with banks, credit agencies, educators and other big players in the finance space is necessary in order to stamp out debt for young people.”
If you want to find out how to improve your credit rating, check out one of my past blog posts on the topic but there are also a couple of #topmoneytips that you can share with the young people in your life to make sure they don’t have to worry about debt or their credit rating.
Money saving tips for students
Get yourself a student discount card and carry it with you wherever you go. You’ll be surprised how much money you are going to save by just showing this little plastic card at the till and the best thing is, absolutely everyone can get a student discount card and save money at 123 shops including The Co-op, Superdrug and dozens of restaurant chains.
Have a no-spend day each week. Plan activities that don’t cost you any money, eat what you’ve got in your cupboard and challenge your mates to join you. It’s so much easier to do when you’re all sitting in the same boat.
Depending on the time you go shopping, you can make some real savings. Supermarkets reduce perfectly fine food items by up to 75% each day, so check out the best times to make savings on groceries in your favourite supermarket and make your money go further. If you want to save even more cash, check out these 10 ways to save money on groceries.
Something even better than saving money is not spending it at all while still getting something new. Check out this ultimate guide to getting freebies and get free beauty products, cinema tickets, food or condoms.
If you regularly shop online, sign up to a cashback website and earn whenever you shop. Most retailers offer shoppers a set percentage of money back whenever they shop through a cashback site. There are even some credit cards that offer cashback rewards but be sure to use your credit card wisely and only for things you really need.
What are your top tips for students who are looking to build up a good credit rating? Let me know in the comments below!
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Great post – it’s so important to build up a credit rating early on.
Absolutely and I think it’s important to highlight that lending is not all doom and gloom as long as you’re responsible with it and meet your re-payments x
Great tips! So important to be money conscious these days. Polly
Thank you, I really think schools could do more to teach children about the risks of spending money that’s technically not yours and, of couse, parents should be good role models too x
Thanks so much for the tips Carolin, this isn’t something I have even considered but honestly its only a couple of years away for my JJ! ekk Mich x
It comes around so quickly, doesn’t it? I think it’s so important to set a good foundation early on, e.g. create good financial habits and raise awareness of the risks that come with lending x
I remember being a student and huge overdrafts etc being offered to me constantly – it was too easy to get credit that I might not have been able to afford to pay back and at the time it seems a brilliant idea but it is so important to be sensible and I think budgeting, credit ratings etc etc should be taught about more in secondary schools so that teenagers KNOW the effects and can make more informed decisions as not everyone’s parents talk to them about these things or understand them themselves.
Stevie x
Same here, I think the government should put a stop to that as well. A student loan does not equal income, so why are additional loans and overdrafts offered to young people who are too caught up in the now to think about the consequences of their actions?
This is sobering but very good advice. I hate to think what my credit rating looked like when I was a student!!
I know, there are so many offers out there to catch those who are too young or carefree to really think about the consequences of their lending. It’s scary…
I think this is really difficult to read. I don’t want my young teen worrying about this yet, but I do know that money should be talked about.
I was nodding along to this. Making sure the children have a financially stable future is one of my aims in life and it’s never too young to start teaching them about money and the teenage years are definitely when to start thinking about credit ratings x