Have fun when you’re young, enjoy yourself, you only live once and the future will take care of yourself. Ever been given that advice?
Nice sound-bites but only really applicable to those fortunate enough to have a large financial safety net from their family – The Trustafarians, the Made in Chelsea crew and those for whom Bond Street is a regular haunt.
For the rest it’s a constant dance between falling off the edge of a money cliff and retreating into a mud hut of social isolation and Scroogery.
Being young is fantastic. You’re not tied down; not to children, a mortgage or a permanent job. You have complete freedom to explore the planet as well as your own passions and are generally encouraged to take advantage of everything this glorious world has to offer.
The downside of course all this happens at a time of zero money, no stable income (and possibly no prospect of a stable income in the near future) and masses of looming debt. Worse it’s influenced by our culture of instant gratification and 24-hour voyeurism of celebrity culture which makes us lust for stuff way out of our price range.
For many young people thinking of the future is suspended – in many cases for far too long.
So how do you circumnavigate that fine line between wanting now and wanting tomorrow? Because we all know that doing both big is near impossible unless daddy is Branson or you are the next Zuck.
Savings come in handy and are at the root of everything else you want to do.
A 2013 study by the Centre for the Study of Financial Innovation (CSFI) showed that 73% of 18-25 year olds had more than £500 worth of savings, and 59% had £1,000 or more.
Whether it’s £2, £20 or £200 a month, start allocating your money to go straight into a savings account every month – it all adds up over time. Start with what you think you can afford and build it up if you don’t notice it’s absence in your normal bank account. It’s likely you won’t!
Put any saving you have into an ISA
Once you make a decision to save, set up an ISA.
ISAs are great because you don’t have to pay tax on interest gained and there’s no capital gains tax on any profits.
Having one kills the temptation to spend it as you can’t immediately access the money for typically a year or two. Don’t forget to shop around for the best deals and interest rates.
And make sure you have a read of the New ISA changes brought in on July 1st this year.
Be realistic to avoid chasing the unicorn
According to CSFI, 40% of young people think they will be able to buy a property in their 20s. The reality is that the average age for non-supported property purchase (i.e. no help from the bank of mum and dad) is currently 38.
So it looks like most of us are not saving enough. Or that our expectations are not aligned with reality.
Being a generation of which will apparently have a worse standard of living than our parents, for the first time ever, we can either lower our expectations or take some simple steps to start saving more (In a way that shouldn’t inconvenience you and your active social life too much)
Start thinking about the future
The sooner you start thinking about the future – the long term future, that point at which your income will stop but your expenses will keep piling up – the better.
Today’s young people could be working well into their 70s and living an extra 30 years to boot!
Living longer? Epic. Needing to pay for it? Challenging.
The advantage of saving into a pension is that your company will match you and the government will top it up – so it is basically free money. The disadvantage is that you won’t be able to touch the dosh for many years to come. This is why There is no one-size-fits-all when it comes to your money but time is a factor for all. So the sooner you start the better off you (should!) be
I’m giving a copy of this to my twenty year old law student daughter – thanks!
Worldwide – the ‘demographic’ after its realisation some 40 years ago, with its potentially enormous advantages of a population living healthier and longer lives, however slowly, is beginning to be appreciated – as are the huge adaptations that such relatively sudden societal change dictate.
As an Organisation dedicated to playing a part, however small, in this complex process, it is worth making a distinction between those recognising a potentially new and lucrative ‘market opportunity’
and those with a more altruistic motive – a quality that frequently distintinguishes our generation.
I was imagining talking this through with my 25yr old son. He has a good degree and is through his obligatory 18 months of unpaid internships. (An iniquitous system – firstly because only those in or near London who have parents who can afford to support them can ‘benefit’. Secondly because If you can’t afford to employ somebody on the living wage why should that young person and their parents subsidise your unsustainable business?)
The idea of saving for a pension is a hard to ‘sell’. Just too far off. No tangible reward and lots of reasons to disengage – may not live that long, the world/future is so uncertain etc. Unless the employer is also paying in, then it becomes easier to sell – nobody likes to lose free money – look at they way we are prepared to take up super market bargains we don’t really need – ‘get 3 for the price of two.’ When we really only wanted 1. But I can see him buying into an ISA. The commitment is so much shorter. But having started he’s into the habit. A bit like stopping drinking/smoking/dieting/grieving – one day at a time.
Thanks for the feedback playpenners!
There is confusion about product and method amongst the population (young and old). PPP is trying to reduce it.
Before product selection, as a foundation for young people, we must remove all confusion of is this simple fact “if you don’t take care of your financial destiny no one else will”
PS I’d love to gear what you’re kids are believing, saying and doing when it comes to their money!