It's Financial Planning Week and pfeg's Tracey Bleakley says there are five essential things for young people to remember when it comes to their money.
Financial planning can be daunting at any age, but it is especially important that young people learn to plan ahead. Many people assume that financial planning is just about pensions and retirement – but it is also essential to achieving short-term goals and getting the job, home and lifestyle that you want. It should be a staple of all young people’s money management.
From next September, secondary school pupils will be taught several topics that are central to good financial planning through the new national curriculum – including budgeting, insurance, savings and pensions. This will make a big difference to future generations. However, there is still plenty that today’s generation of young adults can do to get off on the right financial foot in life – and planning is absolutely key.
Don’t put it off!
Financial planning may sound dull but it can change your life, so don’t delay. You are never too young to sit down and make a plan, whether it is for the next few years or the next 40. Get started now by working out your current financial position – your assets (what you own), liabilities (what you owe), income and expenditure. Use this to create a weekly or monthly budget to stick to.
Think about your goals
This is where it all gets a bit deep. Ask yourself what your life goals are – what do you want to achieve in the next 5, 10, 20 years? Your goals might be to pay off debts or a student loan, get a particular job, achieve a certain qualification or live in a particular place. Next, work out what financial resources you will need to achieve each goal.
Save early and save often
Many life goals will require money in the bank, so get saving. You will also need to build up a reserve of cash to cover emergencies in the short term – aim for enough to cover three months’ essential outgoings. After that, plan to put aside a regular amount in a savings account each payday to go towards covering the cost of your goals. We live in difficult times and this can of course be extremely challenging, but saving even a small amount on a regular basis can make a big difference.
Start a pension (right now!)
This one really is a no-brainer. Retirement may seem like a long way off, but the decisions you make now will have a direct effect on your quality of life later on – so sign up to your workplace pension scheme and start contributing straight away. This may give you less to spend each month, but it will be worth it in the long run.
Remember that you’re not alone
There is plenty of help available when it comes to planning your financial future – including insurance, protection and all the other important topics not covered in these tips. Take a look at the website of the government-backed Money Advice Service for free information and advice (or look through the Money Observer website!), and remember that seeking professional advice from a certified Financial Planner is an option that may prove valuable to you at various different stages of your life.
Tracey Bleakley is chief executive at financial education charity the Personal Financial Education Group
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