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Financial mistakes cause major problems for many young adults

The money decisions taken in the first few years of financial independence may seem inconsequential, but our research has shown that three in five people in their late 20s made their biggest money regret when they were aged between 18 to 22. 

Kirsty Bowman-Vaughan leads on the Money Advice Service’s thinking on ways to help young people manage their money, most recently with our Money Regrets research.

When you hit 18 years old, there’s an explosion of credit available. It can seem like you have hit the jackpot. But in reality you don’t have more money – just more ways to get into debt.

This year, we spoke to people in their late 20s to explore what their money regrets were. The regrets ranged from the big, such as taking out loans they couldn’t pay back, buying a car or going on a holiday they couldn’t afford, to the small every day money decisions we all take every day – mainly they came down to, do I go out or stay in?  

This is a time when the desire for independence combined with optimism about the future and a sense of invincibility drives everything.  Unfortunately that can lead to a ‘spend today, worry about it tomorrow’ attitude. Many don’t think the repercussions detailed in the small print apply to them – money problems are for the middle aged; now is the time for fun. But they do and it can only take a few years, and sometimes even a few months, before those consequences are revealed. Three quarters of those in their late 20s who took part in our research said they’ve made money mistakes that have haunted them for years to come.

And what were the consequences? Some told us how they now struggled to get a mobile phone on contract, credit cards were unobtainable and some had failed credit checks for housing. Others spoke about how they had to sell their car, take on additional part-time work and some even had to move back home just to get by.  We were shocked to hear that more than one in four were left unable to afford everyday essentials, such as food and transport costs because of the money mistakes they had made.

People talked vividly about the impact it had on how they felt about themselves and their personal relationships with others. Half the people we spoke to said they have suffered depression due to their money problems. A quarter of those surveyed said their financial mistakes damaged their relationship with friends and family.

Let's talk about money

So how do we change this? Well, a great place to start is just through talking about money a little bit more.  

It’s practically the last taboo, but talking and sharing experiences is a great way to learn – and avoid – mistakes. Talking to your friends, or maybe someone a few years older than you, about your money worries and goals, is the first step in getting on top of your money. Hearing about what went wrong and what went right from others can help you understand what you need to do to achieve your goals.

Parents, there’s a role for you too here – talk to your kids and involve them in the money decisions you have to make every day and let them experience some of the responsibility and consequences of managing their own money before they reach 18. 

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  • Penny Lewis / 6 April 2016

    I am the person that this article is talking about. My mum was struggling working 4 jobs to bring up 3 of us on her own, unfortunately I didn't get any lessons about money and the distinct lack of it growing up combined with the sudden access to lots of it (credit) was a bad mix. I had to take an IVA by the age of 26 in £18k debt, suffering with serious depression, almost suicidal. Fortunately I got the help I needed but it took me years to sort it out. This sharing of information is critical to changing the culture of spending my generation have grown up in. I know I was not alone but I know also there were people around me who knew about how to save, were careful with their money. We just need to share the knowledge a bit more and not treat it like some secret code!

  • Jo Taylor / 28 January 2015

    When i was growing up I was never spoiled or had very much money spent on me. I was always taught that if i wanted something expensive i would have to save up for it myself. This works really well in teaching how to make decisions too because very often by the time the money was saved I'd changed my mind on what i wanted to spend it on. These are valuable lessons that have kept me out of financial trouble for all my adult life.

  • Mary Hill / 27 January 2015

    We are bringing our children up to be financially responsible, to save for what they want and to be wary of ever buying something on credit. Our 10 year old is already saving her pocket money up for a car! I think that financial management and fiscal responsibility should be taught in every school. In the end, Dickens' Micawber has it exactly right: "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."