In the modern consumer world, it can be difficult to connect tapping a piece of plastic to having money drained from one’s bank account, but Mrs Bierton noted that this conversation, and making conscious spending decisions, is the key to gaining financial freedom. “The other thing is to know what spending means for your money. The biggest thing about money is making sure you only spend what you can afford,” she said.
Budgeting always sounds like putting it in a spreadsheet and worrying about where your money is going but there’s easier ways to budget.
“Knowing where you spend – I think it’s really important to understand where you are actually spending your money because that then gives you the mind-work of:
Do you know where you’re spending your money?
Are you spending your money where you want so it makes the biggest difference to you?
Are you consciously making these decisions?
“These days it’s very easing to fall into unconscious buying decisions so having that really good understanding of why you’re spending. This is what the Starling app recognises, you don’t just get a statement, you get an interactive feed where you can separate your spending and even has the logos of the businesses you’re spending at.”
Mrs Bierton also noted that there are expenses people can’t budge, such as mortgages and loans, but it is where one’s disposable income is going that can make or break a person’s budget.
“Once you know where you’re spending and what you’re doing then you can start budgeting.”
Budgeting often insights thoughts of spreadsheets, endless numbers and still being skint by the end of the month, but as Mrs Bierton explained, there is definitely a right and wrong way to budget, with the former being not including savings as an immovable expense.
“If you know what your expenses are, immediately shift those expenses out and immediately shift out savings, so then what you’re then left with to spend, you’ve decided mentally it’s within your means.
“When I know that my bills are covered and I’ve put a little savings to the side, when I go and tap in the shop, I know I’ve already mentally said I can afford to spend that.
“It just gives you those trigger moments, so if you have to move money out of savings to spend you stop and think, ‘Do I really need to buy this?’,” she concluded.
Understanding whether buying something will bring the value one desires from their money as well as connecting tapping a card with spending that money is vital to controlling impulse spending.
“The world is becoming more digital, it is moving far more into technology and young people are particularly engaged in technology which can help them learn these skills at a young age. Young people are every capable and clever and they do get it, but you have to have that connection between tapping the card and spending money.
“A very important relationship for young people to develop good money skills is the bank but also their parents or guardians and the ability to give them freedom in a controlled environment. Learning those money management skills can be life-changing but for young people it’s much more fun to learn them practically.”
She admitted that trying to teach her son these skills practically left them both with a big bill and some regret: “I had to let my son buy a battery-operated motorbike, because he saved for it, but then when he had spent it he realised, ‘Oh actually, I wanted something else.’
“You want to build that confidence that they can make the healthy money decisions, spend what you can afford is what I was taught and there are tools available and banks like Starling can provide the engaged conversation in a controlled, safe environment that still allows that independence which helps build confidence in both the parents and the child. I think children get very engaged with it.”
She went on to say that for the older generation of young people, those leaving the house for the first time and making more independent financial decisions, in order for them to make the right decision starts at doing the right research.
“Maybe as you get a bit older and you want to make independent choices about where to bank, one of the things I would take into account is how easy it is to open, the service ratings of the bank so you can see how other customers rate them and of course if you do need to take on some debt in an overdraft, which as long as you can manage it is a good thing, go and compare different bank accounts and overdraft rates.
“We believe in transparency and empowering people so you get spending alerts so you know where your money is going, you can get spending insights. It’s ultimately designed to provide you with an informative and engaging experience to help you live a financially fitter life,” she concluded.