Iona Bain, Writer, Speaker, Broadcaster and Blogger specialising in young finances
Iona is a panellist at The Scotsman’s free Annual Investment Conference on Tuesday 30th March in association with Martin Currie Global Portfolio Trust and Rathbones. Register here.
Other webinar panelists include David Coombs, Head of Multi-Asset Investments, Rathbones and Zehrid Osmani, Portfolio Manager, Martin Currie Global Portfolio Trust
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After writing about young money for the past decade, I’m all too aware that the Covid crisis has hit young people the hardest. But for those millennials blessed with extra savings when lockdown ends, opportunity beckons.
Of course, you could just decide to spend, spend, spend. And some young people are living it large regardless of how much they’ve got in the bank, by maxing out credit cards and overdrafts. Some might say: “What’s wrong with that? Those Brexiteer baby boomers wrecked our future and coronavirus forced us to live like hermits. We should just enjoy life, consume to our heart’s content and let the future take care of itself.”
C’mon guys. My time as Young Money blogger has convinced me that we have to do better than that. I’m all for ‘carping those diems’ but spending every penny we have isn’t a good way to do it. Whether it’s earned or given to us by others, money is precious. Once it’s gone, we’d better be sure it went on stuff that really brought us joy and fulfilment. It’s not about having more cash here and now: it’s what we do with it that counts.
Time to get our heads round investing.
You don’t have to choose between saving and investing: you can and indeed should do both. Saving is right for emergencies and shorter-term goals (attainable within five years) because savings are protected and they can be accessed either instantly or at a predetermined time.
Investing is a much riskier, longer ride. But that’s why it’s perfect for those starting in their 20s and 30s, who have years and decades to wait for their money to grow. Plus, we can take immense satisfaction from the very act of investing.
We are committing our money in the hope of earning a financial return, yes. But investing also takes the economy forward. It helps businesses start up, grow, hire people and provide much-needed services. It helps countries and their citizens become more prosperous. It helps to fund essential infrastructure like roads, bridges, schools and hospitals. It even helps to fund new energy sources to power the world.
Investing is an act of practical hope. It can be a tangible, meaningful way for individuals to make both their lives and the future of society a bit better.
We are now starting to realise that idealistic young people can drive huge changes in where pension funds invest. Not a week goes by without a financial institution making a new commitment to being more planet-friendly in its investing process – though this should always be subject to a ‘greenwash’ warning.
Pension funds all-too-often rely on impressive-looking reports produced by companies keen to tick lots of virtuous boxes. No matter if the underlying business destroys natural habitats or props up corrupt regimes: if it recycles all its office paper and has a float at a Pride carnival, it’s in! Okay, I exaggerate – but only slightly.
We should also be wary of surveys that portray millennials as more activist than they really are. Researchers go to young people and ask: “Would you like your money to be responsibly invested?” And we say: “Yea, of course!” That’s not the same as making it happen.
But many pension funds today do offer ethical funds. They’re not perfect but they’re more ethical by most people’s standards than the default.
There should also be one or more funds that will take greater risks than the default for those investing for the long term. With some providers, you can switch in minutes during your lunch break, but others require you to make a call or write an email.
Young people are the customers behind the meteoric rise of new financial apps that are shaking up the status quo and forcing many banks and investment companies to up their game.
Besides, in my experience, the people who are the loudest to shout about the elitism of investing are often the ones quietly building up all their assets behind-the-scenes, from high-value property to pensions. If they have decided they don’t want to miss out, why should you?