Podcast  

Podcast: How to get into the savings habit early

 

Small steps in budgeting and saving money are important lessons for young people to learn as we head into 2021.

Speaking on the FTAdviser podcast, four specialists across the financial services industry spoke of ways to help young people make - and keep - good resolutions about saving money.

Panellist Annabel Brodie-Smith, communications director at the Association of Investment Companies, commented: "It is time to be prepared for the unexpected.

Article continues after advert

"Put aside that money - at least three to six months' cash for emergency funds, but also do all those things you've been putting off. Make that will, get on top of that paperwork, find out what is going on with your pension and actually start saving."

Her comments were echoed by fellow panellist Jason Green, head of workplace research for FTRC/Benefits Guru, who said: "Understanding your finances is key. 

"While most people have a basic understanding of what their income is each month and their fixed outgoings, rough idea people need to drill down into that and the workplace is an ideal environment to start doing that.

"Most pension providers are attended to delivering financial wellness propositions alongside their pension offering. This is high on the agenda for 2021; providing tools and services that can help you really understand where you are spending your money and what you have left."

Paying off debt, using technology to help control spending, cut back, form a budget and proactively save more, are key to helping form good money habits.

And if adults can get their savings and budgeting habits sorted out using technology and online tools, so can their children and grandchildren, given the rough rule of thumb that financial habits are formed by the age of seven.

Robert Gardner, director of investments for St James's Place, has written children's book 'Save Your Acorns', a parable for the modern day in learning the importance of saving, compound interest and philanthropy. 

Speaking on the podcast, he said: "There are three things I teach young people about long-term wealth creation - you need to earn it, you need to keep it, and you need to grow it."

He said it is important for young people to understand how to budget, how to understand tax and how to understand one's spending.

"Our money habits are formed by the age of seven", he said, explaining that even small steps in budgeting and "gifting their future selves" money through saving was an important lesson to learn.

Also on the podcast was Ewan Edwards, commercial director for Aldermore.  He commented: "One of the words for me in 2020 was 'resilience'. The year's events taught me and my customers the importance of financial resilience."

When it comes to using technology to get started on a good savings habit, he added: "Getting a better deal is a few clicks away. This idea of 'it's too much hassle' is false. It's just a perception. You can earn a better rate in a few minutes."