Where Does It Go? – UK Money Blog £

Got some interesting statistics from the FSA this week about how much the average 20-something spends on a night out – find out more at www.whataboutmoney.info, a financial site set up by the FSA to help young adults with their finances. They say:

New study reveals the true cost of going out

The Real Life Costs Report* from What about money? found young adults thought they were spending nearly £60 a week on socialising, but in reality young adults are more likely to be spending more than £90 on ONE night out (£92.22 UK average).

The report reveals that many of the UK’s young adults are going out more than one night a week, which could result in spending up to as much as £547 per month just on nights out on the town. That’s over half (53 per cent) of their monthly expenditure on having a good time and a possible £6,570 spent on socialising every year.

This makes for an annual socialising bill of more than £47 billion amongst the UK’s youth population**.

The research found that in the current economic climate, young people are trying to manage their money better but despite their best budgeting efforts, many are getting caught out by the unplanned costs that usually boost the final price tag of nights out.

Over half (53 per cent) said they buy new clothes for a night out but many said they purchase shoes, make-up, and new haircuts adding an average of nearly £30 to their overall spend for a night on the town. It’s easy to see how extra ‘hidden’ costs can stack up!

How did they break this down? Well, according to the study the average 20-something spent:

Young adult cost of a night out…

• Getting ready, e.g. hair, beauty and clothes etc – £28.31
• Drinks -£22.39
• A tasty night-time snack, eg. kebab, chips, bar food and takeaways – £16.42
• Going out and getting home, eg. public transport or taxi fare – £13.23
• Entry to a club, gig, bars and other events – £11.87

TOTAL (night out) = £92.22

I suspect this figure may be gender bias, given the emphasis on the “getting ready” budget. Rebecca Filletti, a 23 year old trainee barrister from London said:

Rebecca Filletti

“It can be tricky to budget for a night out as you sometimes forget about the small things you spend money on – the cost of haircuts, clothes and make-up can all add up, but you don’t consider them part of a night out. Plus added extras like taxis or food on the way home can all mean you spend more than you originally planned to.”

Quite, but compared to my last evening it sounds like Rebecca here was attending the Proms or some such – I find it pays to just take cash out with you and not your card to avoid the temptation of drawing that extra £20 – admittedly I can walk to most entertainment nearby so don’t have to incur transport costs.

It sometimes galls me considering how much a person’s life is spent earning for those couple of hours a week where they can really let their hair down, it seems the way things are set up is too put young people into debt so they have to work the rest of their lives to pay it off – take the Student Loans for example, where only 20 years ago University was free to most, we now of course have University Fees (unsuccessful campaigned against when I was a student)

I made many mistakes when I was 21ish with money that I’m still paying off now – I suppose it is part of the learning process. For instance, taking out a loan with the bank with PPP(which basically you paying the bank to make sure they get their money if you ever go unemployed), running up large overdrafts and not shopping around for deals – all really due to lack of education. I’d be an advocate of basic money sense taught in schools, more so than it is currently, but could the school system just be factories for turning out good little workers for the country these days? (league tables, tests and subjects that work well commercially pushed over arts/fitness)

At any rate, I fully support the intention behind www.whataboutmoney.info so check it out if you’re 16-24 and looking for help, although I suspect if you’re on a personal finance blog you’re probably pretty clued up already!

If you’re interested in the area breakdown for the study, they were:

Money Spent On Night Out
UK Average – £92.22

• London – £93.13
• Yorkshire & Humberside – £82.44
• North West – £91.41
• North East – £80.84
• South East – £88.71
• West Midlands – £90.02
• East Midlands – £78.39
• Northern Ireland – £99.95
• South West – £94.66
• Scotland – £97.35
• Wales – £87.83
• East Anglia – £98.54

*All figures, unless otherwise stated, are from 72 Point. Total survey sample size was 2,000 and was carried out on-line.

**Figures based on current number of 16-24 year olds in the UK (7,220,400) and average annual earnings of this age group in 2008 (£12,313). Data provided by Office of National Statistics.

Guest Post from What About Money? a website run by the FSA of the UK to help 16-24 year olds understand money.

Savings and investments

In our grandparents’ generation, saving a good chunk of each pay packet was standard practice – and the reason why was very simple. In those days, there were no such things as credit cards or store cards. And personal loans and bank overdrafts were not normally available to the average man on the street. This meant that if you wanted to make a large purchase, such as furniture or even a motor car, there would only be one way to do it – save.

Saving: A timeless habit

But despite the borrowing options open to the over 18s today, saving is still the best way to buy anything you need. Not only do you stay out of a debt (which means you won’t have to pay interest), but by saving you can earn interest instead on your money making you richer still.

Even if you are not saving for anything in particular, putting money aside each month – even if it’s just £10 or £20 – is a great habit to get into. Having a little bit of cash to fall back on gives you choices and freedom.

But stashing your cash under your mattress, or even in your every day current account, is no good as you won’t be earning interest on it. Instead put your money into the right savings account.

Where should I save?

As soon as you hit 16, you will have to save in an adult’s account where, unlike a child’s account, tax is payable on any interest you earn. However, the tax man does allow every resident adult in the UK to save a certain amount tax-free in what’s called an ISA (Individual Savings Account).

For this tax year (to April 2009), the amount you are allowed to save before you have to pay tax on interest is £3,600. For this reason, an ISA is always the first place to start saving. But make sure you find an account that pays the best rate of interest by doing some research online first.

What’s best for you?

If you are lucky enough (or just work hard enough) to have more than £3,600 each year to put aside, it’s time to look at other kinds of savings accounts. A regular saver with instant access to your funds is the most straightforward – though it may not pay the best rates of interest, especially if you do not save the minimum required per month.

If you don’t want access to your money for a year or two, fixed rate bonds tend to pay better rates of interest. But if you change your mind and withdraw your money during the term of the deal, the interest earned could be wiped out entirely.

You may also prefer to use an online savings account but – especially if you are already prone to internet spending – bear in mind just a click of a mouse could undo all your hard work.

Most people never have to worry about this but if the bank or building society you are saving with goes bust, the Financial Services Compensation Scheme (FSCS) will protect the first £50,000.

Investing on the stock market

When it comes to money management, saving is always the best place to start. But while the process is rewarding, it is slow and steady too. That’s why, in addition to their savings, some people choose invest the money. Essentially, investing is saving for the long term (usually over five years) but with the hope of getting a better return..

You can invest in different ways, for example buying shares in companies. But there are other options such as property and fixed interest investments (these are where you loan money to companies or the government and you get interest in return). But investing is a complicated process and novice investors usually don’t pick these investments themselves.

Instead they invest in a fund, like a unit trust, that pools your money with other investors and spreads it out in different areas on the stock market. The fund could invest just in shares, sometimes focusing on specific sectors such as large UK or European companies. In addition to funds that invest in shares, some focus on property or fixed interest whilst others may spread across all three types. But the detail is left to a fund manager whose job it is to literally manage everyone’s money.

Depending on this fund manager’s choices, and the state of the markets in general, the value of your investment can go up and down. But, as you would expect, the service is not free. The fund manager will charge a percentage of the market value of the fund every year.

If you find that you get the hang of the markets, you can even ‘stock pick’ yourself. But, to use a familiar phrase, you’ll have to do your homework first.

There are various places you can review internet banks to see which will be best for your needs.