Investing in young people
Parents are being encouraged to become better savings role models for their offspring – not least to make them less reliant on the Bank of Mum and Dad.
It can be a challenge to persuade more people to invest from a young age when the focus is on everyday expenses, and many will turn to the Bank of Mum and Dad for help. Parents should also realise they are important role models when it comes to saving, according to research.
A Bank of Scotland consumer study found that almost two thirds of young people aged from 18 to 25 say they have friends or family who already invest, but the main financial role model for this age group is a parent. And some 42 per cent of young people turn to their mums and dads for help with money, while some will also look to financial advisers, money-related websites, and their own banks for support.
There are products available specifically tailored to helping the younger generation save for a rainy day. Bank of Scotland launched its Invest Wise 18-25 account in February this year. It has no account fees, with minimum contributions of £20 a month.
The bank says that Invest Wise 18-25 is the latest way in which it is creating simple and cost-effective means to help young people invest.
Offering investment illustrations, the Bank of Scotland said if someone starts investing £20 a month at the age of 18 they will have saved £3,460 by the time they are 28. And if they put away £100 a month they will reach £17,302 over that period.
Manuel Pardavila-Gonzalez, managing director, Bank of Scotland Investments, reports that the bank can see younger people are becoming more switched on to investing because it can help them make their money work much harder. Starting with more affordable amounts can help them balance their everyday priorities with bigger life goals, according to Pardavila-Gonzalez.
He adds: “Parents can play an important part in talking about managing money and financial futures with their families, including how small steps now can help make a real difference in the longer term – especially if they are often seen as their children’s biggest financial role models.”
More work has to be done to get young people to save, with research published last year by the Financial Conduct Authority, revealing that young investors are more likely to have long-term goals in mind when dating than when investing. The authority is encouraging young investors to adopt the same principles to investing as they do to their dating lives.
CASE STUDY
Jennifer McKenna is a mother who has emphasised the importance of saving to her two sons. Jennifer, pictured in the middle above, is mum to John (26), on the left, and Cameron (24), right, who still live with her at home in Falkirk. She works in finance, currently as a self-employed mortgage adviser.
Jennifer says: “I have perhaps taken things for granted because I’ve always been in financial services and understand how it works, but during my time as a mortgage broker in recent years, I’ve come to realise that not everyone is as financially literate. I say it’s all about budgeting and getting the younger generation to do the same.
“My parents weren’t very wealthy, but they saved and encouraged me to follow suit. When my boys were younger, I would always try to save their Child Benefit. I’m a single parent and would put some money into a bank account from my salary every month for our family holidays and Christmas and track everything on a spreadsheet.
“My boys have seen how I manage my money, and we live within our means. They’ve never been ones for going out and spending lots of money. When they got money from their grandparents for Christmas, or whatever, they would save up to buy what they wanted, like an Xbox or Playstation game.
“John went to Strathclyde University to study engineering and now has a full-time job. Cameron is an apprentice electrician. If interest rates had been a bit lower they might have had houses of their own by now. But, by letting the boys stay at home, it means they can save a bit extra for deposits. Both the boys also have things like Help To Buy ISAs.
“My message is for young people to live within their means and budget. Education is important, and I think they now get told more about finance at school.”
Cameron agrees he was taught about the importance of saving by his mum. He adds: “I started saving when I got pocket money and put it in my piggy bank. I liked the excitement of counting the money and taking it to the bank, or going to a toy shop for a new game and paying in cash.
”As well as a Help to Buy ISA, he now has other things in place, including a monthly savings plan.”
In terms of tips for others, Cameron says: “Budget – don’t live an extravagant lifestyle. Look at taking advantage of banks’ current account switching incentives, research options, and speak to friends and family to make sure schemes are not a scam.”
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