Footballer Marcus Rashford reckons teaching kids at school about personal finance would empower them – and he’s right.
We need to give youngsters the skills to handle their own money and teach them the basics of life when it comes to spending.
pokubanks/instagramPoku’s top ten tips on what kids should know about money by the age of 18[/caption]
tiktok/@pokubanksThe personal finance expert under the name @Pokubanks sees mainly young people interested in how to make the most of their cash[/caption]
Role model Marcus this week launched a NatWest project to help youngsters get confident with cash.
As a personal finance expert under the name @Pokubanks, I have more than 330,000 TikTok followers, mainly young people interested in how to make the most of their cash.
Here’s my top ten tips on what kids should know about money by the age of 18. Show it to your teens – but you might find it useful too.
WATCH an exclusive video from Poku Banks on how to manage your money at thesun.co.uk.
tiktok/@pokubanksShow these tips to your teens – but you might find it useful too[/caption]
How to budget
IF you want to avoid debt, you’ve got to budget.
A lot of people are scared to even look at their bank account and go over their expenses, so this first step will put you ahead of a lot of people.
The best way to do this is to look at incomings and outgoings. Work out what you’re left with and then figure out what you’re going to do with your surplus cash.
Understand the difference between needs and wants. You need to pay your heating bill – but you might want some new trainers.
Make sure you set some aside for savings, then stick to your plan by tracking your spending.
There are some good budgeting apps out there like Money Dashboard Neon, which categorises your spending and shows you your total balance across all your accounts after bills. Get logged on and take control.
How to read a payslip
GettyIt’s vital to make sure you’re getting what you’re owed[/caption]
Some adults who have worked for decades don’t even bother reading their payslips.
But it’s vital to make sure you’re getting what you’re owed and being charged the right amount of tax.
Your slip will list payments from your employer, a tax code from HMRC and your National Insurance number. The latter remains the same throughout your life.
It should also show deductions from what is known as your gross (full) pay including any tax, NI, pension and student loans.
That leaves you with your net pay – the amount you take home. Your payslip should also detail how much gross pay you’ve had in each financial year which runs from April to April.
How to manage debt
DEBT is a double-edged sword – there is good debt and bad debt.
Good debt is loans to start a business, student loans and mortgages.
This is because you’re expecting a positive return on the money you’ve borrowed.
Bad debt is car loans, holidays, clothes and payday loans. This is bad as the asset will either depreciate (your car) or you’re paying more for something that can easily be saved up for (a holiday or clothes).
The interest rates on payday loans are unreasonably expensive.
Pay off debt with the highest interest rate first. This is the best investment you can make as you’re reducing the future interest that would have to be paid.
Be honest with yourself about what you can afford. To work out your debt-to-income ratio, this is your monthly debt payments divided by your gross monthly income.
Try these savings methods
THE 1p saving challenge: You save 1p on day 1, 2p on day 2, 3p on day 3, and so on. By the end of the year, you can save £667.95 if done correctly.
No spend weekends: Decide to stay home and spend no money on certain weekends of the month. You’ll realise how much you can save not going out.
Overpay your mortgage: Making higher monthly repayments can reduce the interest in the future – saving you money in the long run.
Understand credit scores: A credit score basically tells lenders how well you manage debt. If you’re £20,000 in debt on credit cards but only earn £25,000 or haven’t paid your mobile bill on time, lenders will know and charge you higher interest to borrow or reject you entirely.
Check your score with sites such as Experian. If your score is low, make it your priority to sort it or you could be in trouble if you need to borrow for something big like a car or a house.
Learn how to save
GettyMarcus Rashford this week launched a NatWest project to help youngsters get confident with cash[/caption]
Saving is another word for delayed spending.
Understand what you’re saving for. Are you saving to spend or saving to invest?
Saving to spend is saving up for a new car or a holiday.
Saving to invest is saving up for a house deposit or equipment to start a business.
Doing the latter will increase your income, allowing you to save even more.
Get wise on whether you want something or need it and don’t be pressured by your mates into spending what they don’t need on the latest gadget, clothes or trips out.
Learn about National Insurance and State Pension
YOU need to understand the link between paying National Insurance and getting your state pension in later life.
To get the pension you need to make National Insurance payments for at least ten years.
To qualify for a year you need to earn over £242 a week from one employer. If you’re self-employed you need to pay NI contributions.
If you’re not working because of sickness or disability or because you are a carer, you can get National Insurance credits instead. Parents who claim child benefit for a kid under 12 can also get credits.
If you don’t fall into any of those groups you might be able to pay voluntary NI contributions. Log on to the Government website gov.uk to find out more.
How income tax works
AlamyBe sure not to make ‘careless errors’ like Tory minister Nadhim Zahawi[/caption]
Sounds like a complicated subject, right?
But it’s basically the amount you pay the Government on the cash you earn.
Anything you earn up to £12,570 is tax-free. After that, you’ll have to pay 20pc of your wage as tax when you earn between that amount and £50,270.
This rises to 40 per cent for any more you earn between £50,271 and £150,000. And everything you earn above £150,000 is taxed at 45 per cent.
(By the way, be sure not to make “careless errors” like the Tory minister Nadhim Zahawi.)
How to get a mortgage
YOU will need a deposit of between five and ten percent of the price of your home for a mortgage – a fair chunk of cash.
It’s worth seeking advice from a mortgage broker as they have access to all of the rates and understand the latest trends in the industry.
Find your perfect property then talk to your lender (recommended by the broker).
In terms of paperwork, you’ll need utility bills, proof of any benefits, a P60 form from your employer, your last three months’ payslips, a passport or driving licence to prove your identity, bank statements and two or three years of accounts if self-employed.
If you have got more than one job, then you will also need a tax return form SA302.
How to set up a business
NOT everyone wants to work a nine to five job – some may want to be self-employed or create value. Here’s how to do it:
You need a business idea, but don’t stress – you don’t need to make the next Facebook or Uber. If you can mix a traditional business model with a new niche the money will come rolling in.Research your idea. You can learn a lot about your industry through books, podcasts, consultancy and your network.Create a business plan with an executive summary, business model, products or services you will offer, the target customer, how you will market, competitors, finances and projections.Register the business at Companies House on GOV.UK – it costs £12.Set up the finances and accounting. Open a business bank account, get an accountant to help you file your taxes and accounts, and get accounting software to help with bookkeeping.
The different types of investments you can make
GettySomething as little as a gym membership is an investment in yourself[/caption]
A lot of people are scared of the word investment, so they shy away. But something as little as a gym membership is an investment in yourself!
You can invest into 3 things; yourself, a business, or a financial asset.
Yourself: courses, books, gym membership and therapy
Business: side hustle, LTD company, high-income skill
Financial: Stocks, Property, Crypto.
I would always start with investing into yourself first, everything that happens in your life revolves around you so improving yourself automatically improves everything that stems from you like your business or your investment decisions.