Understanding Employment Contracts
There are 3 main types of employment contracts you might come across:
Full-time: Usually around 35 to 40 hours a week. Includes sick pay, holiday pay, pension, and job security.
Part-time: Fewer hours, but still gives legal rights like minimum wage, holiday pay, and notice periods.
Zero-hours: No guaranteed hours. You might work different hours each week, or none at all. You still have rights, but it’s less secure.
Understanding Renting & Housing Basics
Types of Rental Homes: Most 16 to 25-year-olds start with shared flats, studio apartments, or renting a room.
Weekly vs Monthly Rent: Some places advertise rent weekly (e.g. £110/week), but you’ll usually pay monthly.
Deposits: A deposit is usually 1 month’s rent paid upfront to cover any damage or unpaid bills.
Tenancy Agreements: A legal contract between you and the landlord. It covers your responsibilities and their duties.
Council Tax & Utilities: Most renters pay Council Tax plus water, gas, electricity, and sometimes broadband.
Shared Renting: Renting with others can save money, but you’ll need to get along and share responsibilities.
Understanding Credit & Debt
Credit Cards: These let you spend money you don’t yet have, up to a limit. You must repay it monthly or pay interest.
Interest: This is the extra you pay for borrowing. If you don’t pay the full amount each month, interest adds up quickly.
Loans: A loan is borrowed money that must be repaid over time. Can be for cars, emergencies, or other big purchases. Missed payments damage your credit score.
Buy Now, Pay Later (BNPL): Popular on websites like Klarna or Clearpay. You order now and pay in chunks, but missing payments can lead to fees and debt collection.
Minimum Payments: On credit cards, you can pay as little as £5/month, but this means it’ll take years to repay and cost much more.
Debt Traps: Debt can spiral. Borrowing from one place to pay off another leads to stress, defaults, and even court.
Credit Score: This shows how reliable you are at repaying debt. Poor credit makes it harder to get a phone, car, or even rent a flat.
Mortgages: What Are They?
A mortgage is a loan to help you buy a home. You borrow money from a bank or lender and repay it monthly over a long period, often 25 years or more.
Deposit: You usually need to pay 5% to 20% of the home’s value upfront.
Monthly Payments: You’ll repay a part of the loan plus interest every month.
Interest: This is the cost of borrowing money. Even a small percentage adds up over time.
Fixed vs Variable Rates: Fixed interest stays the same for a while; variable can go up or down.
Term: A 25-year mortgage means you’ll make 300 monthly payments.
Missed Payments: If you don’t pay, the bank can repossess your home.
Understanding Interest with an Example
Imagine borrowing £150,000 at 5% interest over 25 years:
Without interest: you’d pay £150,000.
With 5% interest: total repayment = over £250,000.
That’s £100,000+ extra just in interest. The lower the interest rate, the better. Always shop around.
Understanding Pensions
A pension is a way of saving money for retirement while you’re working. When you stop working, it gives you a regular income. Most people get a pension from three sources: the State Pension, a workplace pension, and sometimes a personal pension.
Workplace Pensions
Most employers automatically enrol employees into a workplace pension scheme. You’ll pay a percentage of your earnings in, and your employer will also contribute. The government even adds tax relief - free money. The earlier you start, the more your savings grow.
Starting Young
Even if you earn a small wage, paying a little into a pension early makes a big difference long-term. It’s not about putting in loads, but putting in regularly.
Understanding Insurance
Insurance protects you financially if something goes wrong. Common types include:
Life Insurance: Pays out money if you die, helping loved ones financially.
Critical Illness Cover: Pays out a lump sum if you get a serious illness.
Income Protection: Replaces some of your income if you can’t work due to illness or injury.
Why Bother?
Many people avoid thinking about pensions or insurance because it feels boring or too far away. But if life throws something unexpected at you, having protection in place can prevent disaster. Planning ahead is an act of self-care.
Think ahead: Imagine you’ve just become a parent. What are three things you think you’d spend the most money on in the first year?
Everyday Costs
Food, clothes, nappies, school uniforms, and transport are regular expenses.
Hidden Costs
Childcare fees, after-school clubs, replacing lost/damaged items.
Big-Ticket Costs
Cots, pushchairs, car seats, laptops or tablets for school.
Housing Costs
Raising children often means needing a bigger home, so rent or mortgage may increase.
Healthcare Costs
Prescriptions, dental care, glasses, and over-the-counter medicines.
Education Costs
School trips, sports kits, books, and online learning subscriptions.
Time Costs
Parents may reduce working hours, meaning less income coming in.
Long-Term Planning
Saving for university, driving lessons, or helping children move out later.
Unexpected Costs
Repairs, replacing broken items, unplanned medical needs.
Budgeting
Planning ahead reduces stress and avoids debt.
Scenario Task
Sam and Jordan have just had their first baby. They both work full-time and earn a combined £2,600/month.
Rent: £750/month
Childcare: £900/month
Bills (utilities, food, transport): £750/month
Leisure/subscriptions: £200/month
