BRIGHTER LATER: the benefits of early financial planning.
Young people are failing to grasp the basics of financial
planning, putting potentially bright futures at risk.
Most young people imagine a prosperous and secure future
for themselves and their families. Yet a generation is emerging
without the building blocks required for making this dream
For anyone with ambition for comfort in later life, financial
planning is an essential tool and yet large numbers of young
are failing to engage with financial advisers, products and
providers because they lack an understanding of the basic
rules of personal finance.
A recent report by the UK's Financial Conduct Authority revealed
an epidemic of financial illiteracy among 20 to 40 year olds.
This lack of financial nous, together with a dangerous reliance
on borrowing and credit, has created a generation whose present
financial lives are as precarious as their futures.
Equally worrying is that, according to financial advisers,
when young people do make contact, the motive is almost always
spending rather than saving or investing.
what's to be done? George Clason's 1926 best selling personal
finance classic, The Richest Man in Babylon, is a good
place to start. There are few better introductions to the
essentials of successful financial planning. Clason's collection
of parables, based in the ancient city of Babylon, set out
"the secret to wealth" in the form of "seven cures for a lean
In your 20s and 30s, saving or investing may not be high
on your agenda but the first of Clason's "seven cures" should
be. Getting rich, it is revealed, begins with paying yourself
first, or more specifically, putting aside 10% of your earnings.
Anyone - even those on basic starting salaries - can follow
this simple rule. Once you commit to setting aside 10%, you'll
soon learn to live without it.
Other pearls of wisdom imparted by Clason include spending
less than you earn, making sure the money you've put aside
earns more money and minimising risk by making informed investments.
This might all seem like common sense but, as worryingly large
numbers of young are now demonstrating, it is remarkable how
elusive the seemingly obvious can be when it isn't enshrined
in a sound financial plan.
Without a plan based on independent financial advice, you
are at risk of setting unrealistic goals, falling prey to
your financial weaknesses and failing to make the most of
your strengths.What is more, the earlier you engage with the
process of financial planning, the bigger the difference you
will make to your finances in the future.
Getting the basics right when you are young will not only
ensure that you set off on the right path but that you stick
to it later, when the rewards are greatest. If you or someone
in your family would like to read The Richest Man in Babylon
by John Clason, please contact your VFS adviser and we will
arrange to send you a copy.