Finishing school is an exciting time, full of possibilities for your future. Whether you’re planning to jump straight into work, continue your education, or take some time to explore the world, having some money saved up can make a huge difference. This is where a launch fund comes in.
A launch fund is a pot of money you save whilst still at school, specifically to support your transition into adult life. It’s like giving your future self a financial head start, providing you with more options and flexibility when you finish your studies.
Why is this important? The period right after leaving school can be both thrilling and challenging. You might need to relocate for university or a job, buy professional clothing for interviews, or fund a gap year adventure. Having a launch fund can reduce financial stress during this time and allow you to make choices based on what you really want, rather than just what you can afford.
What is a launch fund?
A launch fund is more than just a savings account. It’s a financial strategy that can help you achieve your post-school goals. Unlike general savings, a launch fund has a specific purpose: to support your transition into the next phase of your life.
Your launch fund could be used for a variety of purposes, depending on your plans:
- Travel or gap year: If you’re dreaming of exploring the world before settling into further study or work, your launch fund could cover flights, accommodation, and experiences.
- Short courses or training: You might need to pay for additional qualifications or training to enter your chosen field. Your launch fund could cover course fees, materials, or exam costs.
- Relocation: Moving to a new city for university or work? Your launch fund could cover moving expenses, rental deposits, or essential furniture.
- Transportation: You might need to buy a car or pay for public transport passes to commute to work or university.
- Work essentials: Depending on your career path, you might need specific items to start work. This could include a professional wardrobe, tools (like knives for chefs), or a laptop.
- Business startup: If you’re entrepreneurially-minded, your launch fund could provide seed money to start your own business.
How much do you want in your launch fund?
Setting a target for your launch fund is a crucial step. Here’s how to approach it:
Start by considering your future plans in detail. If you’re planning to go to university, research the typical student living costs in your chosen location. This might include accommodation, food, textbooks, and social activities. For those dreaming of travel, investigate the average daily costs for your desired destinations, factoring in flights, accommodation, food, and activities. If you’re planning to enter the workforce, think about the costs associated with starting a new job, such as relocating, purchasing work-appropriate clothing, and transportation.
Estimate costs
- Make a list of everything you think you’ll need money for after school.
- Research the costs of each item. Use university websites, travel blogs, or job sites to get accurate figures.
- Don’t forget to include a buffer for unexpected expenses.
Set a realistic target
- Add up your estimated costs to get a total figure.
- Consider how much time you have to save and how much you can realistically put aside each week or month.
- Set a target that’s challenging but achievable. Remember, even if you don’t reach your ideal amount, any savings will be helpful.
For example, if you’re planning to go to university, your estimated costs might include:
- First month’s rent and deposit
- Essential furniture and household items
- Textbooks and course materials
- Living expenses for the first month
- Travel costs
- Emergency fund
Strategies for building your launch fund
Building your launch fund requires a combination of smart budgeting, increasing your income, and reducing unnecessary expenses. Start by tracking your income and expenses for a month to get a clear picture of your spending habits. This exercise can be eye-opening, revealing areas where you might be spending more than you realised. Categorise your expenses into ‘needs’ (like school supplies) and ‘wants’ (like entertainment). This categorisation will help you identify areas where you can potentially cut back.
Increasing income
- Consider taking on a part-time job if you haven’t already.
- Look for opportunities to earn extra money, like tutoring, babysitting, or selling items you no longer need.
- If you receive pocket money, ask if you can do extra chores for a bit more.
Reducing expenses
- Cut back on non-essential spending. Could you reduce how often you buy takeaways or new clothes?
- Look for student discounts on things you need to buy.
- Consider cheaper alternatives for your regular expenses. Could you switch to a cheaper phone plan, for example?
Where to save your launch fund
Choosing the right place to keep your launch fund is an important decision that can impact how quickly your savings grow. Look for savings accounts specifically designed for young savers, as these often offer better interest rates. Some countries offer tax-free savings options for young people, which can be an excellent choice if available to you. Research the options available in your area and compare the benefits of each.
It’s crucial to keep your launch fund separate from your everyday spending money. Open a dedicated account for your launch fund. This separation serves two purposes: it makes it easier to track your progress towards your savings goal, and it reduces the temptation to dip into your savings for day-to-day expenses. Seeing your launch fund grow in a separate account can also be highly motivating.
When choosing an account, consider both accessibility and interest rates. You’ll likely need access to your launch fund soon after leaving school, so avoid accounts with long notice periods for withdrawals. At the same time, compare interest rates between different banks. Even a slightly higher rate can make a noticeable difference over time, especially if you’re saving a significant amount.
Tips for successful saving
Successful saving often comes down to creating good habits and sticking to them.
Automatic transfers
One of the most effective strategies is to automate your savings. Set up a standing order to automatically transfer a portion of your income or pocket money to your launch fund account each month. This ‘set and forget’ approach means you’re saving before you have a chance to spend the money, making it easier to stick to your savings plan.
Track your progress
Tracking your progress is another key to successful saving. Keep a visual record of your savings progress – this could be a spreadsheet, a savings app, or even a simple chart on your wall. Being able to see your progress can be highly motivating. Don’t forget to celebrate milestones along the way, whether that’s reaching a certain amount or consistently saving for a number of months.
Resist the temptation to withdraw
While saving, it’s important to avoid common pitfalls. Resist the temptation to dip into your launch fund for non-essential purchases. If you do need to use some of the money for an emergency, make a plan to replace it as soon as possible. Don’t be discouraged if you have a month where you can’t save as much as you’d like – remember that every contribution, no matter how small, is bringing you closer to your goal.
Making the most of your launch fund
When the time comes to use your launch fund, it’s important to approach spending wisely. Start by prioritising essential expenses. Create a spending plan that ensures your money lasts as long as possible. This might mean choosing a more affordable accommodation option or buying second-hand textbooks to make your funds stretch further.
While it’s important to cover your immediate needs, try to keep some money aside for future opportunities or emergencies if possible. Your launch fund doesn’t have to be completely depleted as soon as you leave school. In fact, if you can continue adding to it even after you’ve left school, you’ll be giving yourself an even stronger financial foundation.
Remember that your plans might change, and that’s okay. One of the great things about a launch fund is that it can be adapted to support your new goals. Be prepared to adjust your spending plan as your circumstances change. The financial management skills you’ve developed in creating and maintaining your launch fund will serve you well as you navigate these changes.
Ready to build your launch fund?
Building a launch fund is a brilliant way to prepare for life after school. It not only provides financial security but also teaches valuable money management skills that will serve you well throughout your life.
Remember, every bit you save is an investment in your future. Starting early gives you more time to build your fund, but it’s never too late to begin. Even if you’re in your final year of school, saving what you can will still make a difference.
You can find more money tips for teens and young adults on our website here.