How to Develop Good Money Habits in Your Twenties

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You're done with school, plodding graciously into your mid-twenties, and finally getting your first tastes of that 'real world' your world-weary Grandparents warned you about all those years ago. So you better get behaving something like a grown-up as – like I'm sure those increasingly miserable hangovers are telling you – things are probably gonna change soon. Whether it's families, mortgages, pensions; one way or another, over the next five to ten years you'll be evolving past that meal deal and flatshare lifestyle. And while this all sounds like a detached and surreal dream to you at the moment, the more you do today the better prepared you'll be for tomorrow. So here are some simple routines and tips to help prepare you for when you're older, greyer and those hangovers are simply earth-shattering.

Keep a monthly calendar for your spending

While it may sound painfully obvious, if there's one thing you lot are worse at than avoiding spending, it's keeping a track of spending. And no matter how grim you think things will look, they're always easier on the eye when kept in the light. If you maintain a calendar for your monthly spending, you'll never feel that anxiety of being in the dark again. So set up a spreadsheet on your computer or start using a money calendar app on your phone, so it's simple for you to update on the go. Then - whether it's rent, bills, direct debits, your salary or even those unexpected rounds of White Russians – you can keep track of what's going in or out of your account. This way you can avoid living like a hermit, surviving off tins of beans until pay day.

Make your employer work for you

A lot of young people are so pleased just to have a job that they're fully focused on pleasing their employer, which is fantastic, but it often means they miss out on benefits they're entitled to. Pension schemes, share-award or share option schemes, or simple employee benefits like gym memberships, eye tests, money advice services and counselling, there are plenty of things you could be missing out on. So have a comprehensive discussion with your employer and find out exactly what you can reap from your employment. If it's day-to-day savings or something much more exponential, they may contribute to making your work that bit more tolerable.

Cut credit card spending

Yes, we all know how useful having access to credit can be, but we're also aware that our most reckless spending sprees come when we're vulnerable and tempted by that rectangle of plastic. Well, here's something you can do to instantly improve spending habits: keep your card in an ice cube tray in the freezer: by the time you've defrosted it, the urge to spend will have passed. Seriously, in a world where you can buy milk, socks and pizza without even moving, there's no real need for an irresponsible person like you to hold a physical copy of a credit card. Aviva's resident expert, Alistair McQueen actually pleaded with youngsters to fight their impulses and practice the "48-hour rule." He continued, "We all face temptations to buy wherever we go. Research suggests we're impacted by over 3,000 promotional messages every day*. Temptation is all around us, and we love to shop. The "48 hour rule" says wait 48 hours before making an impulse purchase. If we still want it after 48 hours, and we can afford it, go ahead and buy it. Chances are, however, we will have forgotten all about it by then. A simple step, like waiting 48 hours, could make a big difference to our budgeting and our financial well-being."

To Pension or to Mortgage?

Obviously in this post-recession universe, it seems like pension or mortgage is pretty much a binary, one or the other decision. But does it really need to be like this? We spoke to our pal Alistair again, who could provide in-depth stats, figures and advice on the issue.

"First, let's get some facts. The average age of a first time buyer in the UK is now 31*. The average price of a first time buyer's property is, according to a Guardian report based on Nationwide data, £195,000 (in London, it is £423,000). The first step onto the property ladder can feel like it is getting higher and higher. Pensions, however, has some good news to share. Under 35s now represent the biggest age group of all savers in personal pensions*. 2.7 million of the 7.9 million personal pension savers are under 35. That's more than one-in-three. Despite the financial challenges facing many young people, they get the need to save for their retirement.The desire to have a home and a pension is understandable. As with every generation, there is no easy answer to this tricky balancing act. The balancing act today, however, is probably trickier than ever. Nothing beats careful budgeting, planning and saving. And the earlier we begin budgeting, planning and saving the sooner we will have the opportunity to realise our desire."

Sunny day saving

Now that you're a grown-up and everything, you should probably get saving. So - if you haven't already - speak to your bank about a savings account and use an automatic transfer to put away a portion of your monthly income. And while we know how unappealing and miserable this may sound to you, if you set yourself goals it can make things much more attractive. Whether you make the pot of gold at the end of the rainbow something like a trip away or decide on a more serious commitment like a mortgage, the next time you're weighing up which microwaveable meal screams 'Tuesday night!', you can visualise sitting on that beach or drinking wine in the garden of your future home or drinking wine in the garden of your future home.

Make sure there's a balance to your spending

It doesn't matter how much you love chowing down three courses on pay day or your heart is set on clearing your shoulders of that Uni debt, you should make sure that there's a balance in your spending, saving and investment. Try not to fall into the age-old trap that many young people do, placing too much of a focus on hard assets (stuff) or getting embroiled in financial assets (investments) too quickly. The truth is, there's no right way of doing things, but try to ration your money between general savings, socialising with friends, paying that debt around your neck, day-to-day living expenses, holidays, those retirement dreams, investments and a rainy day fund, so that you're better prepared down the line.

Help from the government

As buying property is becoming such an endemic problem amongst Britain's youth, the government has set about some schemes that can aid you in your quest to have a home. Our expert has again shed some light on how you can make the government work for you in 2016 and beyond. Alistair McQueen dropping truth bombs here: "There is the Help-to-Buy Individual Savings Account (ISA). This product is for first-time buyers. The government will give you a 25% bonus on top of everything you save in this product, on the understanding that the money in this product will be used to help buy a home. There are some restrictions, including a limit on government bonuses of £3,000. In the future this product will be closed and replaced with the Lifetime ISA – see below.

"In 2017, a new product called the Lifetime ISA (LISA) is being launched." This product is for the under 40s, and it can be used to help buy a property or to help fund your retirement. The funds must be held for at least 12 months from first saving into the account but you can save up to £4,000 each year, and receive a government bonus of 25% – that's a bonus of up to £1,000 a year. You can use some or all of the money to buy your first property, or save it until you're 60. But beware of the risks and charges. If you choose to use the money for something other than to buy your first home or for retirement there is a 25% government charge applied to the amount withdrawn. Nevertheless, these products have been designed with the intention of helping people get on the property ladder, so they are worth serious consideration amongst first-time buyers." Keep in mind that these rules may change.

Does your bank account still make sense for you?

We all have that memory: being dragged along to the bank with our Nan to deposit £5 into our first bank account, getting your first cheque book in the post, slinking into the nearest branch on the high street during our lunch break at college – and without forgetting these memories are precious, we're not sure whether your bank loves you as much as you love it. And have you ever stopped and considered whether your current bank is the best one for you, now you're an adult? Sometimes when switching banks, you can be offered benefits like interest on credit balances, cashback on household bills, a longer-lasting interest-free overdraft, free overseas spending and more. Also, contrary to common belief, it's straightforward to do. So go online and find a credible site in which you can compare accounts and potential benefits, finding a deal that makes sense for you.

How much do you think you should be saving for your retirement? Use Aviva's Shape My Future interactive online tool to build your future life and discover how much you might have to live on in retirement.

*"Research suggests we're impacted by over 3,000 promotional messages every day" source: Media Dynamics, Inc. September 2014.

*"The average age of a first time buyer in the UK is now 31" source: Government report, UK House Price Index data downloads July 2016

*"Under 35s now represent the biggest age group of all savers in personal pensions." source: Government report, Personal pensions: contributions and tax relief statistics