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Financial tips for young adults: some of the key tricks to help secure a stable future

Personal financial planning for the future might not be on your list of priorities as you navigate the job or rental market, but developing good habits early on can help you save more in the long term.

To help you (or your grown-up child) plan for a brighter financial future, here are our top tips.

Updated: 27.07.26

By Brendan Tinney

This content was factually correct when written but may not reflect current developments or information.

Financial advice for young people

1) Budgeting – understanding the 50/30/20 rule

The 50/30/20 rule is a common budgeting model. It means splitting your monthly income (after tax) into three ‘pots’:

  • 50% to cover essentials (rent, bills, food).

  • 30% for treats and luxuries (eating out, socialising, fun purchases).

  • 20% in savings.

This model won’t necessarily suit everyone, but it does give you a good starting point and encourages you to start saving early. In reality, if you live in an expensive area or city, you might need more than 50% of your income to cover essential costs. If that changes, you’ll need to adjust the other categories accordingly. For example, if you live in London, you might need to budget 70% for essentials, 20% on treats and 10% for savings.

Pay yourself first, Warren Buffett is famously quoted as stating “do not save what is left after spending, but spend what is left after saving”.

2) Emergency funds – the 3-6-9 rule

Saving is all well and good, but having cash readily available ensures you’ve got the means to cover any emergencies, which is where the 3-6-9 model is often used.

Using this rule means you should set aside enough money to help you cover three, six, or nine months’ worth of living expenses, depending on your personal circumstances. Here’s how the rule is broken down:

  • Three months’ worth of living expenses should be sufficient for a single person with a regular income and no financial dependents.

  • Six months of savings is recommended for couples who share bills including a mortgage and who may have one or two dependents.

  • Nine months of savings for anyone with an unpredictable income, such as the self-employed.

It’s also worth bearing in mind that, while savings can help cushion short-term financial hardship, it’s not always a practical solution if you need long-term financial support. However, you can give yourself an extra safety net with income protection insurance, which can compensate you if you become too ill to work over an extended period.

3) Managing debt and your credit score

Used sensibly, a credit card can be a handy tool, and it offers extra benefits, including protection for purchases over £100. But it’s important to use them carefully as it’s easy to get carried away – just remember that all forms of credit work on the basis of ‘buy now, pay tomorrow’ and not ‘buy now, pay never’.

If you’ve got a credit card with an introductory offer (such as interest-free or low interest), don’t forget to clear your balance before the offer ends. If not, you’ll face higher interest fees.

If you do use credit, it also helps to monitor your credit score. Your score is essentially a way for lenders to gauge how reliable you are at repaying what you owe. If you have a good or excellent credit score, you’re more likely to be approved for credit or loans with the best interest rates, compared to someone with a poor credit rating. You can check your score for free at the main credit reference agencies in the UK:

Missing a payment can make it harder to gain credit in the future, for example, it could mean you struggle to get a mobile phone deal or a mortgage later on.

If you have debts, you should also prioritise paying back the most expensive first; often, this is credit cards or store cards, which typically have high interest rates.

When you consider your debts, it’s important to differentiate between ‘good’ debt and ‘bad’ debt:

  • Good debt – money you borrow which should generate a greater return, for example, when you invest in your education, like a student loan or invest in property with a mortgage.

  • Bad (consumer) debt – when you borrow money with high levels of interest to buy things you don’t need or won’t increase in value (credit card debt is often considered to be bad debt).

4) Compound interest

It’s a cliché, but when you’re young, time is on your side, which gives you an advantage when it comes to saving and investing. One often overlooked feature is compound interest, which is when you earn interest on the interest you’ve already accumulated. For example:

  • You have a savings account paying 4% interest and save £1,000 in the first year

  • At the end of the year, you’ll earn £40 interest, bringing the total to £1,040

  • In the second year, you’ll earn another 4% interest on your new balance, earning you £41.60 (4% of £1,040), bringing your new savings total to £1,081.60

If you want to make even more out of your savings, you can also consider investing in funds rather than relying on a long-term savings account. If you choose to invest and seek the advice of an independent financial adviser, always check they’re authorised to give advice by the Financial Conduct Authority (FCA).

5) Don't opt out of your workplace pension

When you’re enrolled in a workplace pension scheme, your employer contributes to your pension if you earn over a certain amount. You’ll also benefit from tax relief from the government. Choosing to opt out means you’re missing out on what is essentially ‘free money’. So, while it’s tempting to withdraw from a workplace pension to increase your take-home pay, it could leave you financially vulnerable in the future, unless you can afford to top up a pension later on.

You can also monitor the performance of your workplace pension by checking how it’s been invested. Generally, high-risk growth funds focus on volatile assets, that can deliver higher-than-average returns in the long term (but also come with higher short-term risk). That said, investing in these types of funds early on can help you reap bigger rewards in the future.

Plan now for a secure financial future

When you’re just starting out on the career ladder, retirement can feel like a long way off, but it’s never too early to start thinking about your pension. The money you pay into a workplace or personal pension today will have the opportunity to grow over your working life. If you leave it too late, you’ll end up having to pay much greater contributions in order to achieve the same benefits.

If you’d like to explore your options in greater depth and speak to one of our financial advisers, call us on 01603 967967.

If you’re a parent looking to secure your child’s financial future, you can also speak to an adviser about generational wealth planning.

The value of investments and any income from them can go down as well as up and you might not get back the original amount invested. The past is not a guide to the future. The value of tax benefits depends on your individual circumstances. Tax laws can change.

Need financial advice?

Whether you want to speak with one of our advisors or have a general enquiry, we're here to help.

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