If you finished university over the summer, let’s start with the congratulations. Three or more years of study have hopefully paid off. You’ve got your degree, enjoyed some time out and are now possibly entering the world of work.

Moving on to a new and more independent chapter of your life is exciting, but it can also be nerve-wracking – especially when it comes to managing your finances. Below, we’ve compiled four tips you may wish to consider, to help you feel more confident about spending wisely and saving for your future.

1. First things first, create a budget

Creating a budget can be a helpful first step to taking control of your finances. An effective budget is one that you can stick to while being able to save towards your goals.

Think about what you need to spend money on and what you might want to save for in the future. For example, you may want to set aside money each month for holidays as well as for longer-term savings.

If you have high-interest debts, make sure there is enough room in your budget to meet any minimum payments, and preferably pay the debt down. You should try to repay high-interest debt before you start investing.  

How you budget depends on what works best for you. Some common strategies include:

• The envelope method – split your spending into different categories or ‘envelopes’. You can only spend the money in each envelope for each designated purpose – for example, £150 for food shopping each month, and so on.
• Zero-based budgeting – start a new budget each month, questioning every expense you have. By having to justify everything each month, you keep a close eye on your costs.
• Pay yourself first – set aside money for your savings immediately after you get paid and then you’re free to spend the rest. Perhaps a simpler way to think about it is that you’re paying your ‘future self’ first!
• The needs/wants/savings approach – allocate money to each category as you see fit. Some people choose to follow the 50/30/20 method, with 50% going to their needs, 30% to their wants and 20% to their savings.

2. Build up your emergency savings

Once you’ve created a budget and have some room for savings, think about what you’re saving for.

The priority for many people is to build up some emergency savings. This can help you to cope with unexpected expenses, such as moving costs or replacing bigger items like a bike.

A rough rule of thumb is to set aside the greater of £2,000 or half a month’s expenses.

You might also want to target a higher level of savings to help guard against the risk of losing your job. We generally suggest saving up 3-6 months’ worth of living expenses.

You never know when you might have to use your emergency savings, so make sure you can access them at short notice and that they’re in safe assets like a bank account or a lower risk investment such as money market fund.  

3. Check out your employer’s workplace pension

If you’ve turned 22 and earn more than £10,000, your employer will automatically enrol you into a workplace pension, helping you to save for retirement. If you’re younger than 22 and earn at least £6,240 a year¹, you have the right to opt into the scheme.

The minimum pension contribution will be set at 8% of your salary between £6,240 and £50,270. This comprises 4% from you, 3% from your employer and 1% tax relief from the government.

Some employers will contribute more than the government requires. Look out for any offer from your employer to ‘match’ the contributions you make into your pension, as this can really help to boost your pension savings.

If you opt out of your workplace pension, you don’t have to contribute to it. But you will lose out on the 3% employer contribution and the 1% tax relief from the government, meaning you effectively give up free money.

Retirement probably seems like a lifetime away, but saving into a pension from a young age can make a huge difference to your future.

4. What about saving for a house?

Another big priority in your 20s might be saving for a deposit on your first home.

Two options to consider are an individual savings account (ISA) and a Lifetime ISA (LISA). ISAs and LISAs both shield your money from tax, which means more of your money goes towards your goals.

With a LISA, the government will top up your contributions by 25%, but it will also impose a 25% penalty if you use your LISA to buy a house worth more than £450,000 or take the money out before you turn 60². That could leave you with less than you put in, so it’s important to think about what you’re going to use your LISA for. You need to be below the age of 40 to open a LISA. We do not offer LISAs at Vanguard.

For ISAs and LISAs, there are cash versions and stocks and shares versions available. The stocks and shares versions will invest your money in the stock market. Think about whether you’re able to commit your money for at least five years and are willing to accept the risk that comes with investing.

Shares have historically offered higher returns than cash over longer periods³ but with greater volatility (or swings in prices) along the way. Although investments go down as well as up and you may get back less than you invested, history shows that patient investors tend to be rewarded for this extra risk.

Focus on what you can control

Our four tips ultimately have one thing in common – they’re all within your power to do. You might not be able to do everything at once, but gradually ticking items off your financial to-do list can help you feel more in control of your finances.

For more information, and to further help you on your investing journey, check out our principles for investment success.

¹ Tax year 2024-25.

² Gov.uk Lifetime ISA

³ Our analysis of 20-year periods between 1920 and 2022 shows that shares have historically outperformed cash on an average annual basis. Source: Vanguard ‘Principles for investing success’, 2024.