“This last decade has heralded the rise of the gig economy and self-employment as young people increasingly identify this as a way of improving their quality of life. However, those setting out down this career path should ensure they are well prepared for what comes with it, as managing your finances can become quite tricky, and not just from a salary perspective.
“Self-employment can be a truly rewarding experience, and managed correctly can ensure you make a success of it. It is encouraging to see those thinking they will go it alone in future prioritise having an interesting job and creating more time for family, as they look to enjoy their employment.
“However, financial security in this uncertain time should always be considered and the average income from self-employment is just £16,700 a year. The ONS stats show that one in five 16 to 21-year-olds say it is likely they will be self-employed at some point in the future and one in ten 22 to 30-year-olds are self-employed after leaving education.
“And it’s not just the salary that is impacted by self-employment. They do not receive benefits, such as a pension, that their employed peers will. Many of this cohort’s peers will already be successfully auto-enrolled into a pension receiving generous top ups not just from the government but from their employer too. And while saving into a pension at such a young age seems unnecessary, this is one of the most important times to be contributing as that money will get the most bang for its buck thanks to compound interest.
“Not only that, but it can also be much harder to get a mortgage as banks become wary of lending to someone who does not necessarily have secure employment. There is also the pain of having to file regular tax returns, which would more often than not put many people off going down this route due to the complexity it incurs.
“Self-employment will be an excellent choice for some, but it is important they do their research and reach out for support before they start out, whether that is from family and friends, or from a professional. Financial advice can help here too, especially once you are set up as a business or contractor as a good quality planner will ensure you make the best of your employment.”