A Third of Young Adults Are “Money Dreamers”
Having a money goal is a great indicator of a young adult’s skill with money – but not having a plan can mean many fail to achieve their hopes. That’s the big difference between “Money Planners” and “Money Dreamers”, as found in new research from the Money Advice Service.
Though more than two-thirds (69%) of young adults have financial goals, only half have a plan in place – making them “Planners” according to the report produced with the University of Edinburgh Business School. The half without a plan fit into the “Dreamers” type. The rest, those with no goals and no plans, are “Drifters”.
When young adults do make a plan it tends to be short-term, focusing on something they need now such as a holiday or car. The idea that it’s save to spend it is much stronger than saving for a rainy day or retirement.
Just over half (52%) of “Planners” know it’s important to keep track of income and expenditure, and a similar number (45%) shop around for the best deal.
More than half of the “Dreamers” (54%) get anxious about their finances, and only one in five (20%) save for a rainy day.
Low confidence for Dreamers and Drifters
The report discovered that young adults have the lowest confidence with money of any age group, with just 45% happy to manage money compared to 58% of all adults.
Confidence increased though with experience, not just age. As young adults head to university, leave home to rent their own place or get their own job, they became more independent, and with it more confident.
But it’s the “Dreamers” and “Drifters” who are more likely to be dependent on their parents, delaying their own experiences with money and the need to make important financial decisions. In turn their confidence with money doesn’t increase, they’re three times more likely to have problem debt.
Ways to help plan for your financial goal
First, you need to set a goal. Even something short-term, like a holiday or a deposit for a flat, can help you get into a planning mindset.
Long-term goals are even more important. Whether it is planning for retirement by investing in pensions and ISAs or planning to purchase your first home, thinking about events a long time in the future is difficult and requires real determination. Sometimes it’s hard to deal with immediate financial needs and pressures but it’s really important to keep one eye on the horizon.
The simplest way to achieve a goal is to think about when you want to achieve it. Work back from there to see how much you’d need to save each month and the steps you need to put in place. It may be easier to sit down with your partner, parents or even a professional financial planner to get your plan in place and ensure you stick to it.
Whatever you want to achieve in life, it’s easier with a plan. When it comes to money, planning is key and the ability to take control of your finances is likely to be one of the biggest determining factors in achieving your life goals.
If you would like to talk about any of the issues in this article or need more general help with your finances, please get in touch with us.