From 1 April 2020, we will be applying rates of 15%, 25% and 35% EAR (variable) for arranged overdrafts based on a range of factors including your credit score. We explain why in this blog post. We’ve also built a calculator tool so you can check our new rates.

School prepares you for many aspects of the working world, but you may also notice some sizeable gaps in your knowledge. When I finished school, these included knowing what ’left’ and ’right’ meant in politics, how to put on a duvet cover without help and money management.

Start talking about money and asking questions

Getting savvy about money can help you save for what you want and may even give the confidence to start your own business one day. If you can, find someone you feel comfortable discussing money with, a parent or a sibling perhaps, and ask them about bills and budgets. There are also lots of easy to read and informative books out there: You’re Not Broke, You’re Pre-Rich by Emilie Bellet and Go Fund Yourself by Alice Tapper are my favourite practical guides. Or there are free websites such as Money Advice Service.

Emilie speaks at a conference.
Emilie Bellet, author of You’re Not Broke, You’re Pre-Rich and founder of the online community Vestpod.

Set up your first independent bank account

Opening your own bank account, separate to your parent or guardian, is the first step to becoming more financially independent. If you’re 16 or over, you can actually apply for a Starling young person account in minutes and you’ll receive all the same features of the app as those over 18, except access to an overdraft or loans.

Don’t spend everything you earn

Maybe you’ve had summer or part-time jobs, or maybe you’re about to start your first one. Putting in the hours and seeing the rewards in your bank account can be incredibly satisfying but try not to spend every penny you earn. Building a cushion of savings can give you something to fall back on when you need. If you can, include savings as part of your budget.

Learn how to budget

Now about that budget. The earlier you get into the habit of living within your means, the easier it will be to continue throughout your life. Budgeting is about working out what money you have and then planning what you need to spend, say on food or rent, what you want to save, and then deciding what’s left for the rest, like an evening out with friends or new shoes. With Starling, the maths is made easier - the app tells you how much you’ve spent on a daily and monthly basis.

In their books, Emilie and Alice recommend sticking roughly to the 50/20/30 rule. Use something similar to the table below to work out your budget. Of course, these percentages can be adjusted depending on where you’re living or how much you’re earning. If you’re about to be a student in London, chances are 50% of your income or student loan won’t be enough to cover rent, groceries and transport.

Monthly budget
Monthly income £1000
Needs = 50% eg. rent, groceries, phone bill, transport £500
Savings = 20% eg. paying off your overdraft or loans, building an emergency fund, saving Goals £200
Wants = 30% eg. shopping, eating out, gym membership, Netflix or Spotify subscription £300

Think about what you want to save for

Whether it’s a new phone, festival or even a car, you will probably need to save up to get it. Decide on your savings goals and stick to them. Starling has built a handy savings tool to help you save. You can set up a savings Goal in the app and the money you put into it will be kept separate from your main account - out of sight and out of reach until you need it. You can also use our Round Ups feature - say you spend £1.80, 20p will be rounded up into a Goal of your choice.

If you’re 18, you might also want to think about starting an Individual Savings Account (ISA). Through Starling, you can sign up with WealthSimple or Wealthify in minutes and start investing with just £1 through the Starling Marketplace. You may think you’re too young to start investing but if you invest just £10 every month from the age of 18 with an average rate of return of 7%, you could have built up more than £40,000 by the time you reach 65. Don’t forget though, investments can go both up and down.

Two screens showing the Starling Wealthify integration in Marketplace.

Remember there’s no such thing as free money

Overdrafts can act as a safety net between your next payday or when the next installment of a student loan comes into your account. When you turn 18, you can request that Starling review your account for access to an overdraft. If approved, we’ll charge you a simple interest rate of 15% APR (variable) for what you borrow. For example, if you borrow £100 for 30 days, it will cost £1.16.

If you’re off to university, you may open a student bank account with a high street bank account that offers interest free overdrafts. This can be great while you’re studying, but when you graduate you may need to pay it back before the interest rates jump up. It won’t be free forever.

Try not to forget every maths lesson

As you relax into the summer holidays, you may be relieved to have all those maths lessons behind you. But there are some maths skills I wish I’d kept practising, especially when it came to managing my money. For example, if you start working at a shop and receive an employee discount, it’s useful to be able to know what you’ll be charged before you reach the till and spend your entire week’s salary. Maths is part of making decisions in everyday life.

I wish more apps for money management had existed when I left school. Digital tools such as Starling can make budgets, savings and credit scores so much simpler so that you can make the best of your money right from the start.

Please be aware that from the 1st April 2020 our overdraft rates will be changing. Discover our current rates.

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