5 Things Young People Need To Know About Money

5 Things Young People Need To Know About Money

Eat your greens. Brush your teeth. Don’t go out without clean underwear in case you get hit by a bus…

Parents have always been good at handing out advice. But when it comes to money, the advice is often light-on, especially for unreceptive older children and young adults.

With the benefits of experience, here are five things we really wish our parents had drummed into us about money when we were younger.

  1. The best things in life don’t always come easy – In an age of easy credit it is all too easy to decide we want something, and buy it now – especially when we’re young. A survey last year by comparison site, RateCity, found Australians are now taking on debt much earlier in life with more than 2 in 5 people under 24 having $10,000 to $30,000 in personal debt – largely on credit cards. Debt collection agencies report a growing number of younger people are running into problems with debt.
  2. Young people make the best investors – The problem is though, most of us don’t learn this until we’re too old to benefit. Investing is all about time. Forget hot stock tips. One of the most powerful money-making tools going is compound interest – putting money aside and watching it earn interest on interest every year. And if you’re investing for the longer term in riskier assets such as shares, you have time to ride out the inevitable ups and downs rather than being forced to sell when prices are low – unlike retirees who may need the money to live on.
  3. A dollar in super now is worth several dollars when you’re older Why didn’t our parents tell us we could save a lot of angst and money when we’re older by putting even a small amount into super early? Thanks to compound interest, even small super contributions have decades to grow before you’ll need them in retirement. But by the time we start saving – usually in our 40s – we’re playing serious catch-up. Younger people on lower earnings may also qualify for a co-contribution of up to $500 from the government to kick start their retirement savings.
  4. Bad things happen when you least expect them – So you need to be protected financially – even when you’re young and relatively obligation-free. While life insurance might not be a top priority, how would you cope if you had an accident and could no longer pursue that promising career? As the adage goes, expect the best but plan for the worst.
  5. Financial advice isn’t just for people with lots of money and grey hair – Ideally, we would have developed a lifelong relationship with a financial adviser who would have helped us get on top of our finances early. Financial advice isn’t just about retirement. A good adviser can help you through all stages of your life. But as with super, building financial security is much harder when you start late.

Brought to you by Affinia Financial Advisers Limited