It’s the trend that’s blowing up on social media; but, while it’s all very charming telling your younger self how things mostly worked out better than expected, what about if we were to ask financial experts the same question? What would they advise younger people when it comes to making key financial decisions?
‘You don’t need that many shoes!’
Aoife Lavan, founder, Black Oak Advisory and president, Irish Tax Institute
“If I was to meet my younger self again, I’d say how lucky I was to live in a time when there were opportunities to purchase an apartment. I bought an apartment under an affordable housing scheme in Shankill, Co Dublin, in 2008 when I was in my mid-to-late 20s. It gave me the best financial start in life.
“Under an affordable scheme, you received the property at a discount (up to 50 per cent) and were tied in for 20 years with a clawback applying.
“Young people now have such a difficult housing and rental market to deal with. To them, I’d say keep your eyes and ears open for supports that will make life easier for you in the long run, like availing of local authority affordable housing schemes, local authority home loan, First Home Scheme, Help to Buy, Rent Tax Credit, Vacant Property Grant. There is lots of information on these on the Citizens Information website.
“When it comes to pensions, contribute as much as you can, as early as you can. You don’t miss it in your bank account when you never receive it. And the difference in compound growth is huge. There will be a great opportunity for young part-time workers to opt into auto enrolment when they start their first job – and they will benefit from a lifetime of growth.
“Start saving early, get into a good habit of saving.
“Consider taking a chance on a job outside your comfort zone or something you’ve always wanted to do. Be brave. Know your worth and honour it.
“I’d probably also say – you don’t need that many shoes! As you will live in leggings and runners at a later stage.
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“Buy well on clothes but buy less, as it will be a nightmare looking at them when you can no longer fit into them after having a baby. And then you have the heartache of letting them all go.
“For those in family businesses, tell your parents if you have no interest in the family business. It is hard to watch parents kill themselves to keep a business for a child who doesn’t want it. And spend more time with your parents and enjoy it. Get an understanding of their wishes for their financial future, so you can honour them when the time comes.”
‘Stop buying silly things’
David Quinn, managing director, Investwise
“If I was to have a coffee with my younger self now, I think there are two absolutely key pieces of advice that I would focus on.
“Firstly, I would encourage the younger me to back himself from an early age. Take risks with his study and career choices. Don’t settle for something safe. I feel everyone should try to work for themselves – or at the very least, a small business – at some stage.
“When you are in your 20s and early 30s you don’t typically have the burden of a mortgage or the responsibilities that children bring along, so you can take some chances. This is much harder to do in your late 30s and 40s.
“Seek out exciting opportunities, and mentors that you can learn from. This will give you a more grounded and useful education than any third-level degree could ever do. It’s also a great investment for your future career.
“Secondly, and this will be obvious advice for a financial planner to give, is to start saving early. Stop buying silly things, and put some money aside. Small monthly savings into an investment and pension account in your early 20s can amount to a significant fund by the time you are in your 40s. I wish I hadn’t frittered away so much money in my 20s, and put some of that into low-cost indexed equity funds instead.
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“Don’t chase the next get-rich-quick scheme or try to get too clever with timing the markets. Just keep it simple and consistent. Even just €200 per month from age 22 could be worth €250,000 by the time you reach 50! Often the growth on that small initial savings account can be more than your annual contributions by the time you reach your 40s, so the compounding effect is hugely powerful.
“To get started, think about putting money into a cheap indexed fund in global equities – even €50 a month makes a difference.
“You can do this with a cheap online broker or Revolut – but be careful with the latter, as it’s so easy to swipe the money back into your current account and spend it!
“While I’d suggest avoiding individual stocks or crypto, they can be helpful to learn about how the markets work. It’s good to learn those lessons early.”
‘It’s about making little changes’
Suzanne Cashin, director, RBC Brewin Dolphin
“I would tell myself to invest and take a bit of risk.
“Women make great investors, so it’s never too early to start. People like to say women are risk averse, but I say we’re risk aware.
“While being aware of risks is very important, if you’re too cautious, and leave all your money on deposit at very low interest rates, this is not a good thing either. Inflation can eat into the ‘real value’ of your money over time.
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“So, start small and start early – starting to put money away early is the best habit you can get. Einstein referred to compound interest as the eighth wonder of the world, and it can have a huge impact on your savings.
“It’s about making little changes. Think about your takeaway coffee. The average coffee costs €4.50 a day/€135 a month/€1,620 a year. But if you put it into your pension, with tax relief, that would be €3,240 for a top-rate taxpayer. Now if this grows at 8 per cent over a 30-year period, this could add €385,390 to your pension! Returns are not guaranteed, but over the long term risk assets will outperform.
“For most people, if you’re lucky enough to be offered membership of an employer pension scheme, grab it with both hands, and do your best to match your employer’s contributions.
“Another little trick, which most life insurance providers do offer, it to build in indexation to your pension savings. This means that your contributions will automatically increase by say 5 per cent every year – and getting a pay rise might be equivalent to that.
“It can be enough to keep pace with inflation – remember, starting off something, and then not going back to it, can be a false security.
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“Planning is also important: I like to say ‘a goal without a plan is just a goal’. If you want it to happen you have to write it down. So review your financial goals and plans annually, like a financial health check.
“Take advice – reach out to people and advisers; knowledge is power and the Dr Google book of finance is not always the best advice. And ask questions. When you’re young, you might think, ‘I won’t ask that question because it’ll be silly,’ but there’s no such thing as a stupid question.”
‘Don’t use your monthly credit card limit as a target’
Trevor Grant, director, Affinity Advisors
“Property wise, the world has moved on considerably since I bought my first home in my mid-20s. I hope and expect the housing crisis to alleviate significantly over the next three to five years and for most people in their later 20s/early 30s to have a reasonable opportunity to purchase a first home. On this basis, I would be telling my younger self today the following.
“Be aware of all Government schemes available, eg, First Home Scheme and the Help to Buy Scheme
“Keep your credit rating in good shape. Don’t ignore what may appear to be small and irrelevant financial matters.
“Don’t use your monthly credit card limit as a target. Set up a monthly direct debit to make payments
“Start saving as soon as you can (no matter how small an amount). If you are fortunate enough to be living at home and not paying rent – save money!
“Ultimately most of us aspire to own a home, and we have no idea what health issues we may encounter in the future. The lack of availability of life cover/mortgage protection cover could put a future mortgage in jeopardy. On this basis, it is worthwhile taking out life cover as early as possible. My own children and some of my friends’ children have done this.
“Start pension contributions once you start your first job. No matter how small, it is a great habit to start early and extremely tax efficient.
“Notwithstanding all of the above, enjoy your early mid-to-late 20s and travel as much as you can.”
