Tips on understanding money as a young carer

Help, I don’t understand anything about money!

For many of us, the world of money can be a bit of a head fuck. Terms like ‘mortgages,’ ‘credit ratings’ and ‘loans’ can stress you out, and the pressure to understand it all out can seem like a weight around your neck.

If you’re a young carer or a young adult carer, then you’ve also got loads of other things to factor in, like looking after your family for starters, as well as going to school, university or work and trying to juggle all the other millions of things in your life. It’s not surprising that thinking about money too would be a bit of a nightmare.

So to take the weight off, we’ve spoken to the experts, who are here to tell you exactly what you need to know! So get yourself a cuppa and read this handy breakdown from Holly-Rae and Nick.

Holly-Rae is the Education Equality Manager at Carers Trust. She leads on the Young Carers in Schools programme, which helps schools identify and support their young carers. She also works with colleges and universities to ensure that they are offering appropriate support for young adult carers. Holly answered some specific questions about finding support with your finances as a young carer.

Nick is the Head of Education for Young Adults at MyBnk. His job usually involves planning, designing and delivering financial education training to young people aged 16-25, as well as managing a team of trainers who deliver our courses in bespoke training sites. Nick gave some general tips and information about saving, borrowing and planning for the future.

Is it normal to worry about money as a young carer?

Holly-Rae:

Worrying about money is a very common concern for many young carers, so you’re definitely not alone. Lots of parents talk about money in the home and young carers can often pick up on the worries of those around them, even if you’re not directly responsible for budgeting or family finances. So yes, it is very normal for young carers to worry about finances.

First, you could talk to a trusted adult about how guilty and worried you’re feeling. If not one of your parents, maybe someone at school or another relative – though I know that this might be difficult in lockdown. It’s possible that your parents aren’t aware that you’re feeling this way so, if you feel able to, talking to them might help you feel a little less worried.

Next, you could get in touch with Carers Service. Carers Trust have a search engine of services that are part of our network, or a google search would do the trick. Carers Services offer a huge amount of tailored support and many offer finance sessions for adult and young carers, as well as peer support, activities and emotional support. They will likely be able to work with your whole family as well, so your parents might be able to find some support there when they need someone to talk to about their concerns. Citizen’s Advice would also be able to work with your parents to ensure that they are getting the help they are entitled to.

You are also entitled to a young carers assessment from your local council, which a carers service can help you organise. It’s not an assessment of how well you are doing as a young carer but a professional talking to you and your family to ensure that you’re not taking on unreasonable amounts of care. They look at your situation at home but also take into consideration your education and plans for the future and will work out the best plan forward. Some young carers can feel anxious about this step but it’s a good way to discover some support that you might not have been aware of before!

Should I get a credit card?

Nick:

A credit card and debit card are very different products. Debit cards are for you to access your own money, credit cards are a way to borrow money from a lender via a bit of plastic.

If you need to pay for things and you don’t have money to pay yourself, a credit card might be an option for you. BUT – credit cards can cause real issues if you don’t plan. If you only pay the minimum bills, it can sometimes be impossible to pay back the balance. I know of people taking £200 credit cards and spending £2,000 on repayments.

Some people will take a credit card out to help their credit score – you need to borrow to have a score, no one has a credit score as a default! But you should be careful you don’t borrow more than you can afford. Any borrowing you take on should be planned and worked out to make sure you can afford to clear the debt before you start.

In short, unless you want to borrow money or build a credit score, there’s not much use to having a credit card over a debit card.

What is a credit score used for?

Nick:

Imagine you saw someone random on the street and they asked to borrow your bag…you’d probably say no, right? You know NOTHING about them, you don’t know if they’ll return it…its a bad idea!

But what if someone who you TRUST tells you they always bring it back on time and they look after the stuff you borrow them… You can see how that recommendation from a trusted source might help!

A credit score is basically a score based on how much people trust you when they lend to you. Things like phone contracts, gas bills and loans all report if you pay on time or not. If you have a bad credit file, either people won’t lend to you or they will, but charge a LOT extra.

Companies ask the credit score “bureaus” (people like Experian or Clear Score) – what your credit history is like and make a decision on whether they should lend or give you the financial product you want.

You can’t borrow until you’re 18 so not much you can do to build your score until then! But when you get to 16, you can technically ask to be put on your parent’s bills as a named person which can help your score. However if your parents miss payments, your file will also be hurt so that’s an individual choice.

Once you’re old enough to vote, make sure you register! Aside from the fact that you should have your say by voting, it helps your credit score (cos they know where you live!!) and can be the difference between getting a phone contract or not!

Long story short – a credit file is your borrowing history, and the better it is, the better the borrowing options you will have later.

I’m struggling with money during the pandemic, how do I cope?

Nick:

We made this video with The Mix about how to manage your money during the coronavirus outbreak:

What is the best type of savings account to use to put some money away for when I’m a bit older?

Nick:

In terms of savings accounts, your main options are a normal, high street savings account, an ISA of some kind or some form of bond.

Instant Saver: Means you can take your money out whenever you want, but usually have the lowest rate of interest paid and you’ll pay tax on any interest earned!

ISA (Individual Savings Account): Lets you save at usually slightly higher rates, and you don’t have to pay tax on your interest but you can only put £20,000 each year into an ISA. Side note, if you’re 16 or 17 you can technically open a Junior ISA and an adult one and have £29,000 of allowance until you’re 18, in case you have a lot to save!

A bond: Like the opposite of borrowing FROM a bank – they take your money for a fixed amount of time in return for a higher interest rate. You can’t pull your money early usually so this is a long term solution.

When you hear fixed rate, it means the amount of interest they pay won’t change if the Bank Of England (BoE) interest base rate changes for a set amount of time. Most banks will change their rates in relation to the BoE base rate – these are also known as variable.

What do I need to know about mortgages?

Nick:

A mortgage is just a LARGE loan from a bank to pay for a house. You will need to apply to a bank or mortgage provider, like you would for any loan.

The big difference is that while you can have a loan for no money upfront, most mortgage providers will want to see you have a deposit saved – usually between 10-20% of the value of a house.

That means if your dream home is £200,000, you’ll need to save £40,000 before the bank will lend you the other £160,000

They will also do a detailed budget of your income to see if you can afford a mortgage and the amount you can borrow is linked to how much you are earning – sometimes known as the LOAN TO VALUE ratio.

The two BEST things you can do now if you’re planning to have a mortgage:
1) Start saving for the deposit.
2) Start building your credit score.

In terms of paying it, they’ll set up a direct debit from your bank account so it’ll come out every month automatically like a phone bill! If you don’t pay your mortgage, you will lose your home so it’s important that if you HAVE a mortgage, you keep on top of it.

If I don’t earn much, how much of my monthly income should be spent on rent?

Nick:

We don’t usually talk about a figure you should aim for in terms of how much to spend on rent – ideally it would be as cheap as possible.

Some people talk about the 50/30/20 rule; 50% of your income is for essential costs like rent and bills, 30% on things you want like nights out and buying stuff you like and 20% savings or debt payments – however depending on where in the country you are, some people spend 30-50% of their income on housing.

You could also look into whether you can do the job you love somewhere the cost of living is lower. If you’re on a low income, the benefits system might be able to help with costs as well.

What kind of support is offered to carers looking to go to university?

Holly-Rae:

There isn’t currently a universally offered bursary for carers in England, it’s entirely down to the individual college or university. However, there may be other grants that you qualify for, so it’s always worth calling the university’s Widening Participation teams to find out what’s available. The more people who enquire about it, the more they know that there’s a demand for a specific bursary.

We know that cost is just one of the many factors that stops young adult carers achieving their full ambitions and we want to work with education providers to make getting a degree more accessible. Carers Trust are currently piloting a Student Ambassador programme in colleges and universities across England. We hope to share that learning with universities across the country so they are more aware of the challenges that young adult carers face and start providing more targeted support. We are also working with UCAS on their new application platform, so young carers are made aware of the kinds of support they should be looking for when applying to uni.

For more information about managing your money…

Head to our money page to find plenty of handy tips and information from MyBnk. Read our most recent financial guide to coping with covid.

Head here to find more support on how to cope as a young carer.

Visit our young carers hub page for support and information.

The Mix would like to thank MyBnk and Carers Trust for their help and expertise in producing this article.