We came across a great Twitter thread at the start of the year from Conor Pope, the personal finance journalist in the Irish Times. He asked his followers for their best money saving tip and got hundreds of replies. We picked out a few of these as really good advice to give to teenagers and young adults.
This is one we regularly suggest to clients, and it’s about automating savings to come out of your current account immediately after you are paid each month. Too many people have a bad habit of wanting to save, but only actually transferring the money to their savings account at the end of the month.
At that stage, there is too often nothing left as you mindlessly spend money that is sitting in
your account. Taking the savings out immediately after payday helps you to avoid poor, impulse purchases. A great savings habit for those starting to earn money.
It sounds so simple but it’s the best of advice of all and applies to everyone, irrespective of how much you earn. Teach your kids to live within their means, whatever they might be.
Spending money that they don’t have is the road to financial misery, as they store up future pressure, interest payments and debt that must be repaid. They need to cut their cloth to suit their budget.
This might seem a bit extreme to teenagers, college students and young adults but credit cards have been causing financial havoc for generations. They are so easy to use and even easier to get into trouble with as interest rates on credit cards are typically anywhere in the 15% to 25% p.a. range.
Drill this into the heads of your children – credit card debt escalates out of control at nightmarish speed. If they have a credit card, it simply must be paid off in full… every single month.
How many things did you buy online out of boredom while stuck at home during the covid restrictions? So many of us bought stuff that we certainly didn’t need and probably didn’t even want. We all spent a lot of money – in fact VAT receipts of €15.4bn* in Ireland in 2021 were greater than the 2019 amounts collected!
The lesson for children is to avoid impulse purchases and those made out of boredom. Know the things you want to buy, save for them, buy them, and then avoid buying stuff that you don’t need.
This is a great tip for kids going to college. When buying groceries, write up a list in advance based on what you need. When you go to the supermarket, stick to your list and don’t just mindlessly scan the shelves. When you don’t have a list, you’ll end up with twice as much in your trolley, and with lots of things you don’t need that will end up in the bin.
Tell your kids to make time their friend. Money invested in a pension from an early age benefits from the magic of compound interest. Your children will also see a pension pot building nicely from an early age and this will motivate them to keep saving.
If they put off starting their pension, it’s much harder to start later in life when now it’s a financial pressure and they won’t get the value of being invested for as many years. Start young with small amounts and then build from there.
Follow these tips/great lessons to teach your kids about money and your kids are on the road to a great financial life.
Article first produced on PPS Monthly March 2023 Newsletter.