If one of your nearest and dearest will soon be leaving the family home for the first time – whether it be to go travelling, rent or buy their own property or move somewhere new to study or work – you’re probably feeling a whole mix of emotions right now. You’ll be excited for them, but also nervous about how they’ll cope and of course, you’re probably feeling a little sad about the fact you won’t get to see them as much as you do at the minute.
These feelings are natural and with more young adults between the age of 20 to 34 living at home than ever before, it’s almost become the norm that they’ll be with you for longer, which can make the separation that bit harder. 1
How can you help them prepare?
A great way to help your loved ones before leaving the nest (and to give you added peace of mind) is to make sure they’re fully up to speed with different aspects of their finances. There’s a number of ways to do this and we’ve come up with a handy guide below…
Get credit score savvy
Having a good knowledge about credit scores can really help when young people are starting out. Not only does a credit score play a big part in some of life’s key moments – like getting a mortgage – it can also influence a multitude of other things that they may face after they’ve left home. For example, if they’re due to go travelling or away with friends for a while, they may need a credit card to be able to book hostels or hotels, and they may want to have a credit card with them to use in case of emergencies. If they’ve not taken out credit previously, then they may not have any credit history. And, whilst it’s great that they’ve not been using credit irresponsibly, it could still prove tricky for them to be approved for credit.
Why? Well it’s because the lenders will want to check how they’ve managed credit previously before deciding whether to lend to them and what rate to offer. If there’s no credit history, then there’ll be nothing to help them gauge how trusted they can be with the credit, so applications may be rejected. That’s why it’s important to start building a good credit score as early as possible.
The first step should be to see whether they have a credit history and this can be done by joining Noddle for free. If we can’t generate a report, then don’t panic – it just means that they’ll need to start building a credit report and score from scratch. Things like getting registered on the electoral roll at their current address and making sure they have some bills in their name can really help – find out more here.
Get to grips with the value of money
Whilst young adults may have been paying (probably reduced) rent whilst living at home, for many who are working, it’s meant that the rest of their wages have been their own to do what they want with. And if they’re due to move into rented accommodation with friends, or even buy their first property, it’s important that they’ve thought through what outgoings they’ll have to be responsible for and whether things may have to give in order to be able to keep on top of things.
A good way for them to be prepared is if you spend a bit of time together creating a budget. You can find some handy tips for this here.
Also, try and make sure they’ve got their head screwed on when it comes to credit. When you get that first taste of freedom and are living independently, it can be really tempting to turn to credit and overdrafts for life’s little luxuries that perhaps the wages don’t cover. It can also be tempting for young adults to turn to credit to try and keep up with friends, because of the fear of missing out (FOMO). So it’s always good to try and have a conversation about this before they make that step.
Find out ways to avoid FOMO spending here.
Save save save
It may sound simple, but what we mean here is that it’s a good idea to try and get your loved ones to think about the future as they take their next step. Whilst they’ll be excited and just keen to get going with their new adventure, by thinking further ahead they can start planning for the longer term, as well as enjoying their new experiences.
If they’re moving out to start renting with friends and you’re helping them pull a budget together, try and get them to think about putting a little away each month for the future. If they’re paid monthly, then a great idea is to get them to set up a direct debit that will transfer the same amount every month to a savings account.
If they’re going away travelling for a year or six months, then whilst they’ve no doubt been saving so they can fund this once in a lifetime trip, it might be worth speaking to them about putting some of their savings away for when they get back. That way rather than blow it all, they’ll have some funds to return to. There’s many savings accounts out there where you can’t touch the money too, so that may be worth looking into.
Have a trial run
This one might sound a bit silly, but a great way for them to get fully prepared is to have a trial month before they move out. For example, whilst they’re still living at home, pretend that they’ve already moved out and have all the necessary outgoings to pay for. They could transfer all the relevant costs they’ll need to cover to you and then have a go at living the rest of the month on what funds they have left.
At the end of the month you can give the money back to them and see how they got on!