As I turn 30, I like to invoke the attitude of the great Edith Piaf: Je ne regrette rien.
But that’s only half true. With no financial education at school or university, money matters have been a steep learning curve for me. Like most people, I’ve had to teach myself the basics and make mistakes along the way.
In other words, if I could do it all again, knowing what I do now, my balance sheet might look a bit prettier. Here’s a few choice things I’d like to have known at 16.
Open a bank account asap
Teenagers are so keen to get behind the driving wheel at 17, but opening a bank account at 16 doesn’t seem like such a priority. I say, do it now! Your cash ain’t going to grow if you’ve stuffed it in the bottom of a drawer. When looking for an account, check practical things, such as whether there are any joining or exit fees, or whether they charge you to use your debit card abroad. (None of this applies to Starling, yay! 16 and 17-year-olds can open an account without having to ask a parent.)
Don’t miss out on pensions
In 2012, the government came up with this fabulous idea of requiring all companies to automatically enter their employees into a pension scheme to make sure we are covered at retirement.
If you opt out, you lose those benefits from your employer – a minimum contribution of 5%, and the government’s contribution in the form of tax relief, which is essentially free money.
If you’re self-employed, look into getting yourself a self-invested personal pension (SIPP), or a government-backed product like a Lifetime ISA.
Financial technology is making money management easier for all of us, so use it. If you operate your bank account via an app, you can keep a better eye on your balance and spending habits. (Starling’s app, for example, identifies your spending patterns for you, and helps you to save for specific things thanks to its Goals feature.)
Technology allows you to compare the market for the highest interest rates on savings accounts as well as the best mortgages or ISAs. It gives us all the freedom and autonomy to make better decisions for ourselves. Plus, it’s all rather easy to use and, if you’re using a smartphone, it puts control literally in the palm of your hand. So don’t shy away from it.
Save, save, save
After seven years of interviewing financial advisers, I can say with confidence that their advice is always to start saving early – a minimum of 10% of your salary (don’t worry if you can’t afford that, start smaller and build up to it). Another common tip is to save and set aside at least three months’ worth of expenditures, so that you’re not blown off course by a one-off cost, like a car MOT or your fridge breaking down.
A good tip is to set up a Direct Debit for pay day, automatically siphoning off a certain amount every month, into a separate account where you can watch the balance grow without being tempted to spend it.
Make the decision to invest
Having cash in a savings account is great. If you're looking to achieve long-term growth on your assets, consider investing. Advisers usually suggest investing no more than 10% and having a cash buffer in place for emergencies.
Investment is also an important part of our finances, given that younger people no longer have the security of a defined benefit pension scheme, like many of their parents did, and they can’t necessarily rely on buying their own home and watching property values rise.
Research indicates that women tend to underinvest compared to men. Fidelity’s recent Financial Power of Women study found that 33% of men, but just 18% of women, held stocks and shares outside of an ISA or a SIPP. Yet, when they do invest, women are generally better at it - a fascinating study by Warwick Business School found that women had better annual returns than men. With the gender pay gap and the gender pension gap in the UK, it’s imperative that more women aim for long-term growth. I could preach about this until the roof caves in.
Choose investments wisely
But how do I go about investing? Long gone are the days when you need to sit in your oak-panelled study, poring over a daily newspaper and deciding which stocks to buy and sell. Technology means that for as little as £1 you can start investing via companies such as Wealthify and Moneybox. (Thanks to an API integration between Moneybox and Starling, it has never been easier for Starling customers to put that spare change from their morning coffee into their investment pot.)
Remember, investments in stocks and shares can go down as well as up, so you should only ever consider investing for the long term to iron out the swings.
Keep an eye on your credit score
Your credit score, which you can check with companies such as Experian, Equifax and CapitalOne, is the barometer of your financial health, and is the key to you getting that next loan, mortgage or opening your bank account. Some companies even check it for job applications. What fewer people realise is that every time you are declined for credit, or even if you don’t update your address or pay an old phone bill, your credit score can be negatively impacted. (On reflection, it probably wasn’t a good idea to keep re-applying for that store card.)
How to improve it? Keep your details up to date, sign up to the electoral register and pay off high interest debt as quickly as you can. If you’re sure you can be disciplined about it, it’s not always a bad idea to get a credit card and pay off small, regular expenses, such as petrol, to build your score back up. The good news is your slate is wiped clean after six years – so bad debt won’t haunt you forever. Hello, new me!
Consider financial advice
Ever since changes implemented as a result of something called the Retail Distribution Review in 2013, many people say they can no longer afford to get financial advice as advisers must charge an upfront fee rather than take commission. But if we’re willing to pay £50 every month for the gym – ahem – it might be worth considering making another investment in sorting out our finances. Advice these days isn’t necessarily about what to invest in, either. A good adviser can talk about pensions and saving and budgeting and even cash flow modelling, to map out how you can achieve your life goals. What’s not to like?