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.
Get saving
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