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  6.   /  Three things we should've been taught at school: Money

Three things we should've been taught at school: Money

Credit Scores

Adult life is plagued by numbers that value us and our achievements. Our credit scores are one of the most intriguing examples. It's a way for banks (and others) to judge us based on how well we budget and spend. In other words, they want to know how well we'll return the money they'll lend us.

So, how does one get a good credit score?

In order to prove you're a good borrower, you have to borrow. But that sounds scarier than it actually is. Credit cards are a good place to start, you can get one when you're 18, and most banks have a handy app where you can keep track of your spending (or borrowing) in real-time.

Okay, so you've got the borrowing part down. You get a credit card, and then you spend. Then what?

You've got to show your bank that you're good at repaying your loan. To do so, you can't spend outside of your allowance (this will change depending on your bank and the type of account you have), and you have to pay the full amount back in time.

Your bank will give you a day (usually once a month) when they will ask you for their money back. It's a good idea to set a reminder for that day so that you don't forget. Make sure that you're not spending more than you can pay back too- they'll want every penny they gave you.

It's important to note that not everyone you borrow from will disclose that they're lending you anything. Big companies like Klarna are offering people the opportunity to purchase from their favourite clothing stores and then pay it back later. However, they're not entirely transparent about how that can affect their customer's credit scores.

A lot of young people have been affected by an inability to pay back their Klarna loans and now have to work very hard to get back to where they were before

Our advice? It's good to get some borrowing experience, but make sure that you're researching the company you're working with. Also, don't spend what you don't have- that way you won't find yourself in hot water when they come to collect!

Retirement

When you're young, you probably don't want to spend a lot of time worrying about retirement. It's ages away, right?

We hate to burst your bubble, but it's not as far away as we would like to think it is. Your pension is a sum of money you are supposed to be saving up while you work so that when you retire, you have money to spend!

Saving early matters, and it will help you a lot later on in life (think: if you start saving before you have a family and kids to think about, you might be able to put more aside). But you're not the only one who should be thinking about your pension.

When you go out into the world of job hunting, you'll want to look at the benefits that come with your position. One of the benefits that should matter to you is your pension contribution. This is a set amount of money that your employer puts aside so that government can pay it back to you later on in life when you need some extra help!

There are also bank accounts that will subsidize your pension if you put your retirement savings in there. It's worth checking with your bank to see if they offer that service

Taxes

A controversial topic, but chances are that everyone will have to face the music with taxes at some point! Almost as soon as you start earning money (as long as you're over a certain threshold), then the government is going to come looking for its cut.

Usually, the company you're working with will be figuring out how much tax they need to be paying the government on your behalf. So, it's essential to remember that if you're signing up for the job with a £30,000 salary, you won't be seeing all of it due to taxes and other contributions (like your pension!).

If you're self-employed or own a business (lucky you!), you will have to do the hard part. Luckily, some people are willing to help you, as long as you pay them for it. Accountants are more than qualified to help you not only with how much tax you as an individual should be paying but also how much tax your business should be paying and how much tax you need to keep aside from your employees.

Income Tax:

Income up to £12,500-0% income tax

Income between £12,501 and £50,000-20% income tax.

Income between £50,001 and £150,000-40% income tax.

Income above £150,001-45% income tax.

It's important to note that tax is compound. So, if you earn £150,001, you're probably driving a pretty nice car but also, you're not going to be paying 45% of your income to the government. Instead, they're going to leave your first £12,500 alone. They're going to ask for 20% of the next £27500. Essentially, if your employer promises you a £150,001 salary, they mean £90,662.

We hope you've learnt something new from our blog and that you feel slightly more prepared to go out into the world and know how to spend and defend your money. If you have any questions, don't hesitate to reach out if we don't know the answer!

Insurance

As inevitable as taxes, insurance is also a necessity. Kids should know that if they can't afford to replace an item, they should buy insurance. Americans can't even cover a $500 emergency with their savings when they are faced with an emergency or unexpected event.

Children should be taught about insurance before insurance sales associates approach them. An insurance salesman is a dangerous teacher since they typically teach them about insurance when they are young.

At a minimum, the curriculum should explain:

  • Home Insurance

  • Disability Insurance

  • Life Insurance

  • Car Insurance

Children need to know about different types of life insurance, the difference between liability and full coverage car insurance, etc. But the most important thing is learning when every kind of insurance is needed.

Information in this publication is provided for general information only, and it does not purport to include every aspect of the topics with which it deals. You should not take it as advice. Prior to taking, or refraining from taking, any action based on the content of this publication, you should seek professional or specialist advice. Kixy LTD or its affiliates are not rendering legal, tax or other advice through the content of this publication. A similar outcome is not guaranteed. The content in the publication does not represent, warrant or guarantee, either expressly or impliedly, that it is current, accurate, complete, or up-to-date.

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Kixy LTD is registered with the Financial Conduct Authority under the Payment Services Regulations 2017 for the provision of payment services (reference number: 814005). Kixy LTD is registered with the Financial Conduct Authority as an EMD Agent of PayrNet Limited, an Electronic Money Institution authorised by the Financial Conduct Authority (reference number: 900594). Kixy LTD's registered address: 40 Gracechurch Street, London, England, EC3V 0BT. Kixy is not a bank, the Kixy account is an e-money account. For Canadian customers, Kixy Services Inc. is registered with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) as a Money Service Business (MSB) with registration number M21855906.