Parents often wonder exasperatedly if their offspring ever listen to their advice – but it appears that today’s young adults have learnt from the experiences of their elders when it comes to their finances.
Experian’s Millennial Me & My Money report found that 45% of Millennials – that’s 18-34 year olds – manage to save at least a quarter of their disposable income each month, compared to just a third (34%) of 35-55-year-olds (widely known as Generation X).
Millennials who believe their parents have had a positive influence on their money habits have almost double the savings of those who say their parents had a negative influence.
However, those who say their parents have had a negative influence on their money management are more than twice as likely to have missed an agreed credit repayment, twice as likely to have been refused credit, and twice as likely to have run out of money before payday in the past.
A positive influence from parents (63% say their parents or guardians did) can help the young develop good financial habits. This could help them become savvier when it comes to managing credit, such as making credit repayments on time and saving for when they might need major purchases.
It could also stand them in good stead for the future to helping them get access to better rates on borrowing, which could also help them out when it comes to big purchases later in life.
Understanding how to manage credit
The survey found that 46% of Millennials have never checked their credit report – in fact 80% say they have received no formal financial education. Our research shows that kids who benefit from learning about their parents financial experiences, both good and bad, are more likely to save and less likely to miss a credit repayment.
So we’ve put together a few key tips that we think could help the young become more financially savvy.
- Don’t forget to budget – ensuring you have more money coming in than going out will help you stay on top of your finances and help you avoid either running out of money or going into an unplanned overdraft at the end of the month.
- When you start to manage credit, it’s really important you pay back everything you’ve agreed to pay each month. Missed payments stay on your credit report for six years and can affect how a lender views you when you apply for credit in the future. It’s often a good idea to set up direct debits to pay regular bills to limit the chance of missed payments.
- Before you take out any new credit agreement, check your credit report with all three credit reference agencies. Ensure everything is accurate and up to date and reflects your current circumstances. If you spot anything you believe to be inaccurate, contact the relevant lender and ask them to investigate the entry.
- If you need to, get your credit report in shape well before making an application for credit. Things like ensuring you’re registered on the Electoral Roll, keeping outstanding balances less than 50% of your limit (if you can), and making sure never to miss a credit repayment.
- Remember, if it’s just your name on a credit agreement you will be liable for the debt and your credit report could be affected. Keep this is mind if you are splitting the cost with others in a shared house for example, in case you fall behind with a payment.
Experian has developed a free Beginners Guide to Credit, designed to support young people as they gain financial independence to understand how credit works, how to manage it well and how forming positive habits now can set them up for the future.
*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2028 adults aged 18 to 34 (Millennials) and 2047 adults aged 35 to 55 (Generation X). Fieldwork was undertaken between 17th – 28th December 2015. The survey was carried out online. The figures have been weighted and are representative of 18 to 34 GB adults and 35 to 55 GB adults.