Speak to any parent and they will always say that they want their children to live the best life possible. They want them to feel secure, enjoy the good things and not have to worry about money. But often, parents aren’t able to offer the most reliable financial advice. Many have their own financial stresses and are focused on securing their own retirement, rather than encouraging their children to develop smart habits early in their lives.
Time is their asset
“For younger clients … their greatest asset is time. Small amounts over the next 20, 30, 40 years will make a huge difference to their retirement.” James Wrigley, Principal at First Financial.
This is where First Financial advisers offer helpful guidance. James Wrigley, Principal at First Financial, discusses some of the best ways that young people can start making small changes today that will produce massive benefits for them in the long term.
“It’s never too early to start thinking about your financial future. Even just small things … trying to do some regular savings … can have a great impact.
If you wait until you are 50 and you want to retire in 10 years, you are faced with a mad scramble. You could have been in a much better position if you had started earlier.”
Identifying opportunities to save
We understand that it’s important to enjoy life. People want to spend their money on things that make them happy, things they value, on a lifestyle.
But we believe it’s also important to think about the future and to be well prepared so that lifestyle can be maintained later in life.
Part of the work we do at First Financial is determining clients’ values. James explains …
“If someone really values going on holidays, nice cars, handbags … those kind of things … it’s important that we cover any of those … but then the planning we do is small amounts regularly every month or every six months.
We want to make sure we are allowing for the client’s lifestyle but also planning for tomorrow.”
Advantages of starting young
Right now is the best time to start planning for your future. The greatest advantage of starting young is time. The compounding of small investments initially makes a remarkable difference over a long period of time.
“If you are looking at property, historically, prices have doubled every 10 years. So, if you bought a property in your 20s, it may have doubled by the time you are in your 30s, again in your 40s and again in your 50s. It’s the subsequent doubling in your 40s, 50s and even 60s that can make a huge difference and puts you in a very secure position.
Waiting until you are in your 40s only offers you one or two opportunities to double the return before retirement, so starting earlier is key.”
Why do people keep putting it off?
It is such a straightforward concept, but many people believe they simply aren’t earning enough.
Or they think they need to wait until they are ready to really start planning. Or they don’t think they have enough savings on hand because they want to invest in property. There are many reasons why people delay in securing their financial future.
But you don’t need to start at the top; you can start small with investments in shares or managed funds.
How much money do I need to start?
There is no magic number that means you are ready to start investing. The key is how much money you have left over at the end of each month, after you have paid your rent, your bills and enjoyed your social activities.
Even just $10 to $20 a month over a long period of time can help get you towards larger investments.
There are options that offer far greater returns than just putting your savings in the bank. James says …
“You earn what you earn. You’re spending money living whatever lifestyle you are living … what’s left over is the important part.
If there’s nothing left, then you won’t be able to invest … but if there’s something left over then let’s have a conversation about how to do some smart things.
The important thing is what you do with your money; it’s got nothing to do with what you are earning. We have clients who earn modest salaries, who are doing some really clever things and on paper are much wealthier than those earning the mega dollars.
It’s all about the lifestyle … if you can keep that in check then do something smart with the difference.”
First Financial is running a free Pathway to Wealth seminar on Tuesday 26th March for those in the wealth building stage of life. If you or someone you know could benefit from practical tips about how to start making smart financial decisions, please register your interest here.