A young girl planning

Financial planning: it’s (almost) never too young to start

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As the father of three young children, I already find myself wondering about their financial future. Although under-5s aren’t quite the financial planning and advice industry’s target market, I believe that (within reason) it’s never too young to start working on the financial habits that will last a lifetime.

But I know that financial planning is typically associated with more mature people, so I thought I’d catch up with real life “Millennial” Iona Bain to get a different perspective.

Iona is a finance expert and author of “Spare Change – the ultimate 21st century guide to bossing your finances” as well as an accomplished freelance journalist with regular articles in the Independent and the Sunday Times. I had the pleasure of meeting her for a cup of coffee in Edinburgh – here are some of the highlights:


What does financial planning mean to you?

Financial planning is often associated with older people, or those who have accrued considerable wealth. But the reality is that it is simply the decision to be proactive rather than reactive when it comes to your finances. Many people only deal with money issues when they become problems. The classic example of this is addressing debts when the bills start mounting up – by which time it is harder to ask creditors for leniency. To me there’s a connection between financial planning and life coaching; making sure you have a healthy relationship with your finances.


So what’s the advantage of being proactive?

The problem with this ‘reactive’ rather than ‘proactive’ approach is that not only are problems easier to resolve when addressed earlier – but that fewer emotions are involved, and the ones that are felt are positive. Being reactive can prompt a sense of dread and guilt, whereas being proactive, and planning for the future, can mean feeling positive and hopeful. Which is why financial planning doesn’t just make sense on a practical level – it makes sense emotionally. And it doesn’t just apply to older, richer people – it applies to younger people too.


Are young people influenced by their parents or guardians when it comes to money?

Definitely – they often copy the habits of their parents. When I was researching my book Spare Change, I looked into the extent to which our financial behaviour is determined by our upbringing, compared to the culture we live in. And so much of it is down to our parents – not just what they told us (or didn’t tell us) about money, but the way that they handled it themselves.


So what effect do our parents’ habits have on us?

Our parents’ influence on our attitude towards money can go in two directions. We might understand and appreciate why our parents approached money in a certain way and use it as a template. Or, we might consider that it impacted negatively on our lives as we were growing up – and go the opposite way. And although an individual can obviously change their habits, it’s widely recognised in many quarters that a person’s attitude to money is formed by the age of eight – an astonishingly early age.


Is it enough just to hope you are setting a good example for your children?

No, parents need to talk about money too. That’s because each generation is born into a completely different financial landscape. For instance, young people today are dealing with the problem of student debts – an issue their parents never had to face. So opening up a conversation with a young adult and encouraging them to start financial planning is as important as setting a good example for them to follow.


Is it possible to start financial planning too young?

It depends – with few resources; it’s very difficult to start the process as it involves looking into the future, which has too many unknown quantities. But if, for example, a young person has more resources, such as a family willing to support them, or good job prospects, then they should be thinking about financial planning when they leave university. It might be as simple as deciding whether to rent or start saving for a deposit on a property – but that’s still planning.


What about peer pressure?

It’s a real problem these days: we’re up against YOLO and FOMO (‘You Only Live Once’ and “Fear Of Missing Out’), which are hashtags, or search terms, on social media such as Instagram and Twitter. This is a kind of peer pressure that the older generation didn’t have to worry about. Young people today are living their lives online and what they are doing and how they are spending their money is being watched and judged. This ‘public image’ has a firm hold over teenagers and twenty-somethings and can influence whether they choose to save (not very ‘YOLO’) or splurge (because of ‘FOMO’).


So financial planning can seem a bit… boring?

To some people, yes. But life is all about moving on, becoming wiser, changing your priorities – in other words, making progress. And you can only do this if you have resources at your disposal. And the irony is that if you don’t make a decision earlier in life to provide for your future, you won’t be able to give yourself the option of making progress. So it’s important for young people to think about how they see the future. To ask themselves, what will make me happy, and how can I live according to my own values rather than other people’s agendas, or the rules of social media. If you take control, the future doesn’t seem scary any more. That’s what financial planning is all about – looking to the future and not being afraid of it. It’s a way of empowering yourself, and what’s boring about that!?


What’s the best advice a young person could be given about money?

As a young person, it’s very easy to get caught up in your life as it is now. But although the tiny details of each day seem so important at the time, looking back, you realise that most of what you worried about didn’t matter. The best piece of advice I think a young person could receive about money is to take a step back and think, in ten years’ time, what will I thank myself for having done. Happiness isn’t about being either mindful of the present or looking ahead – it’s a combination of both. Financial planning can be pleasurable and satisfying now, but it will also lay the groundwork for a happy future.


The information in this blog or any response to comments should not be regarded as financial advice.


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