As Care Leavers Week 2024 shines a light on the experiences of young people moving out of the care system, it is important to highlight the unique challenges care leavers face. One of the biggest hurdles is financial independence.  

For many young people leaving care, managing money for the first time is both exciting and intimidating. Knowing where to start with budgeting, handling expenses, and making the most of available resources can make all the difference. This guide offers financial tips for young care leavers that aim to build a strong foundation for long-term financial independence. 

Why Financial Planning Matters for Young Care Leavers 

Young care leavers often face financial challenges that others might not. From finding housing to paying bills, the journey to independence can be full of new responsibilities. Building financial stability is essential to overcoming these challenges and helps reduce stress around money, enabling you to focus on education, employment, or other goals. 

These financial tips for young care leavers provide practical advice on creating a budget, managing expenses, and understanding financial independence. By following these steps, you can gain confidence in managing your money, set yourself up for financial security, and navigate this next chapter with greater ease. 

1. Create a Budget You Can Stick To 

Budgeting is the foundation of financial independence. It may seem overwhelming initially, but a well-planned budget helps you track your income, expenses, and savings. Here’s how to get started: 

   – List Your Income Sources: Write down all the money you receive monthly, whether from employment, government benefits, or other support like grants for care leavers. 

   – Identify Fixed Expenses: These include rent, utilities, transportation, and any other recurring bills. Set aside a portion of your budget to cover these essentials. 

   – Track Variable Expenses: Variable expenses like groceries, clothing, and entertainment can fluctuate. Keep track of these each week to understand your spending habits. 

   – Set Savings Goals: Even if it’s a small amount, saving regularly can add up over time. Aim for a savings target each month, even if it’s just a few pounds. 

   – Use Budgeting Apps: Many free budgeting apps are easy to use and make tracking expenses straightforward. Apps like Yolt, Monzo, or Money Dashboard can automate and simplify your budgeting. 

By building a realistic budget, you gain a clear picture of your finances and can avoid overspending, ensuring that your essentials are covered first. 

2. Establish a Routine for Managing Bills 

Bills can quickly pile up, and missing payments can impact your credit score. Heres financial tips for young care leavers on how to help this: 

   – Automate Payments: Set up automatic payments for recurring expenses such as rent and utility bills. This way, you won’t risk missing a due date. 

   – Create Reminders: If automation isn’t possible, use calendar reminders on your phone to alert you a few days before bills are due. 

   – Prioritise Essentials: Always pay essential bills first, such as rent and utilities. This prevents late fees and ensures that your basic needs are covered. 

-Developing a bill: Paying routine may take some time but will soon become a habit. By staying consistent, you can avoid late fees, maintain a positive credit score, and create peace of mind. 

3. Be Smart with Spending: Track Your Purchases 

Impulse spending can be tempting, especially when you’re adjusting to newfound financial independence. Learning to track your purchases and make wise spending decisions is key financial tips for young care leavers. 

   – Differentiate Between Needs and Wants: Before making a purchase, ask yourself if it’s something you genuinely need or if it’s a want that can wait. 

   – Set a Weekly Spending Limit: Once you know your fixed expenses, decide how much you can spend on discretionary items like food, entertainment, and clothing. 

   – Avoid Buy Now, Pay Later Schemes: While these offers may seem appealing, they can quickly lead to debt if you’re not careful. Stick to purchases you can afford immediately. 

   – Track Small Expenses: Even small purchases, like a coffee or a snack, can add up over time. Tracking these helps you see where your money is going and prevents overspending. 

Spending mindfully and monitoring expenses ensures you stay within your budget and avoid unnecessary debt. 

4. Learn About Available Financial Support for Young Care Leavers 

As a care leaver, you may qualify for various types of financial support to help you transition to independence. Familiarising yourself with these resources can ease your financial burden and give you a stable start. 

   – Care Leaver Grants: Check with your local council to see if you’re eligible for grants, which may cover education, housing, or essential items. 

   – Setting Up Home Allowance: This grant helps care leavers pay for essential household items when setting up their first home. 

   – Educational Bursaries: If you’re in further education, you may qualify for bursaries specifically for care leavers. Speak with your college or university’s financial aid office to learn about available options. 

   – Employment Support: Many charities and government agencies offer support programs that connect young care leavers with job training and employment opportunities, along with any related financial support. 

Understanding the financial support available to you and taking advantage of these resources can help make your transition to independence more manageable. 

5. Set Up an Emergency Fund 

An emergency fund is a savings buffer for unexpected expenses, like medical costs or urgent repairs. It’s a valuable safety net, especially if you’re new to managing finances. 

   – Start Small: Set aside a small amount each month, even if it’s only £5-£10. Over time, these savings will accumulate. 

   – Open a Separate Savings Account: Keeping your emergency fund in a separate account reduces the temptation to dip into it for regular expenses. 

   – Replenish When Possible: If you do use part of your emergency fund, make it a priority to rebuild it as soon as you can. 

Even a modest emergency fund can make a big difference when the unexpected happens, helping you avoid debt and stay on track with your financial goals. 

6. Build Your Credit Responsibly 

A good credit score is essential for renting an apartment, securing loans, and, in some cases, even getting a job. As a young care leaver, establishing credit responsibly is one of the best financial steps you can take. 

   – Open a Basic Bank Account: Start with a basic bank account to learn how to manage your money. Many banks offer fee-free accounts that include budgeting tools. 

   – Consider a Credit Builder Card: Once you’re confident in managing your finances, a credit builder card can help establish credit. Be sure to pay off the balance in full each month to avoid interest. 

   – Pay Bills on Time: Timely bill payments, especially for recurring services, can contribute to a positive credit history. 

   – Check Your Credit Score: Use free services like Experian or Clear Score to monitor your credit score and track your financial progress. 

By establishing good credit habits early on, you’ll build a strong financial reputation that benefits you in the long term. 

7. Seek Financial Education and Support  

Learning about money management can make a huge difference in how confident you feel handling your finances. There are various resources available to help care leavers improve their financial literacy. 

   – Financial Counselling Services: Many organisations offer free financial counselling for care leavers. They can help you create a budget, understand credit, and set financial goals. 

   – Online Financial Courses: Websites like MoneySavingExpert, Citizens Advice, and MyBnk provide courses and articles on personal finance topics, from budgeting to saving and investing. 

   – Mentorship Programs: Some charities and organisations pair young care leavers with financial mentors who can offer guidance and answer questions as you transition to financial independence. 

Taking advantage of financial education resources empowers you to make informed decisions, avoid common pitfalls, and feel more in control of your future. 

8. Plan for the Future: Set Financial Goals 

Setting financial goals helps you plan for the future and stay motivated. Your goals can be short-term, like saving for a laptop, or long-term, like buying a car or even a home someday, these financial tips for young care leavers can be very helpful.

   – Start with Small Goals: Saving for small goals helps build confidence. Once you achieve one goal, set a new one, and gradually increase your target. 

   – Be Specific with Your Goals: Clearly outline what you want to achieve and how much you need to save. For example, if you want to save £500 in six months, plan to set aside about £84 monthly. 

   – Track Your Progress: Regularly reviewing your savings progress can keep you motivated. Celebrate each milestone along the way! 

By setting financial goals, you create a roadmap for your financial future, helping you stay focused and motivated. 

Financial independence can be daunting, but with careful planning and consistent habits, young care leavers can navigate this transition confidently. Following these financial tips for young care leavers, such as creating a budget, managing bills, tracking spending, and accessing available support lays the groundwork for a stable financial future. 

Remember, building financial skills takes time, and it’s okay to ask for help. Utilise the resources available, reach out to support services, and know that every step you take brings you closer to financial independence and security. 

Here at Qualia Academy, our Managing Director Kirsty Watson is a Trustee at the Rees Foundation who also has had experience in care herself, head to our YouTube page to watch our podcast for Care Leavers Week with Kirsty talking about her experience in the business industry with being in care.