Get in the habit of saving
While it may be tempting to blow your salary on big nights out and gadgets, your future self will be thankful for every penny you manage to save. Unless you have dependents, it is likely that your 20s will be the time when you have access to the biggest net disposable income of your working life. That means that now is also a good time to pay off any debts such as overdrafts built up while studying.
Think about pensions early
Retirement couldn’t be further from the minds of most 20 somethings, but compound interest means that each pound saved now, will have a bigger impact on your final pension. Delaying commencing contributions can have a substantial effect on the level you will need to set aside to provide the income you require in retirement. Contributions made to pensions receive tax relief at the higher rate of income tax that you pay. Therefore if you are a basic rate tax payer, a £100 contribution to your pension per month will only cost you £80.
Check the rules of any occupational pensions you qualify for when you start working or move to a new job. Aim to pay in more than the monthly minimum, particularly if your employer matches your contribution. If you are used to paying back a student loan each month, consider adding the same amount to your pension contribution once you complete the repayments and before you get used to the extra cash.
“Help to buy” and Lifetime ISAs
Both of these structures can be used to boost your savings for a first time property deposit. Help-to-buy ISAs offer a 25% bonus with the Government adding £50 to every £200 saved to a maximum bonus of £3000. These ISAs are available until 30 November 2019 but the bonus will be paid to account holders until 1 December 2030. Couples saving for a property can hold individual ISAs and both benefit from the bonuses.
The Lifetime ISA works in a similar way, with a 25% bonus available on savings each year up to a maximum deposit of £4000. Your can withdraw your funds either when you purchase your first property or when you reach the age of 60. LISAs will be available from April 2017 and open only to the under 40s.
Rent a room
If you’ve bought your first property and have a spare room, you could consider renting out your extra space. You can do this for short periods on sites like Airbnb or on a longer lease. From April 2017 you will be able to receive £7,500 from letting a furnished room in your main residential property tax free. Whilst you don’t have dependents and are able to be more flexible in your living arrangements, this is a great way to boost your income.
This article was originally published in The Scotsman on 30 July 2016.