If you finished university over the summer, let’s start with the congratulations. Three (or even more!) years of study have hopefully paid off. You’ve got your degree – barring any marking boycotts – enjoyed some time out and are now stepping forward into the world of work.

But what really matters for your finances when moving from campus to career?

For those of you starting out in the world of work, we’ve picked out four key priorities for your finances.

While the issues around money may seem daunting right now, you can get yourself started by breaking things down with our suggestions below. 

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 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 down 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 – e.g., £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. A rainy-day fund can help you to cope with unexpected expenses, such as having to move to rental accommodation, replace bigger items like a bike, and so on.

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

You might also want to target a higher level of savings, to help guard against the risk of losing your job. If you decide to do this, you probably want to target around 3-6 months’ worth of spending.

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.

The minimum 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 may also open their workplace pension schemes to younger employees or pay more in than the government requires. You should look out for any offer from your employer to ‘match’ the contributions you make into your pension.

If you opt out of your workplace pension, you don’t have to contribute to it. But you will lose out on the 4% employer contribution and the 1% tax relief from the government, meaning you effectively give up free money.

4. What about saving for a house?

Setting aside money for retirement comes up against another big priority if you’re in your 20s though – and that’s saving for a house deposit.

You may decide that it’s better to save for a house than retirement, choosing to get on the property ladder rather than paying extra money into your pension.

This can be a sensible choice, as you’re matching your ability to save with your financial goals.

But in terms of investing your money to save for a house, two options to consider are an ISA or a Lifetime ISA (LISA). Both come with the option to invest in either a cash version or a stocks and shares equivalent, though LISAs are only open to those below the age of 40 or who already have one. We do not offer Lifetime ISAs at Vanguard.

The government will top up any contributions to a LISA by 25%, but it will also impose a 25% penalty if you use it to buy a house worth more than £450,000 or take the money out before you turn 60. 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.

If you have any questions related to your investment decision or the suitability or appropriateness for you of a particular investment, you should consider speaking to a financial adviser

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 here all at once, but gradually you can get there and tick these items off your financial to-do list.

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


Vanguard ISA

Vanguard ISA

Learn more about our Stocks and Shares ISA.

Vanguard ISA

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Important information

Vanguard Asset Management, Limited only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described in this document, please contact your financial adviser.

This document is designed for use by, and is directed only at, persons resident in the UK.

The information contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.  The information in this document does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this document when making any investment decisions.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

© 2023 Vanguard Asset Management Limited. All rights reserved.