Millennials lack basic financial education but managing their money could be as easy as 123

There is no question their financial lives are complicated; often saddled with high levels of student debt, facing squeezed wages and the sky high cost of accommodation, in some respects millennials could be excused for not putting a personal financial plan at the top of their list of priorities – particularly as their level of financial education may not be high.

Whilst few would deny the benefits of a long term savings and investment regime, to those just about managing (JAM today, hoping for jam tomorrow?), it may seem a pipe dream.

However, with personal financial responsibility certain to replace state provision, things are unlikely to get easier any time soon, and a truism is that the sooner you start and the longer you invest for, the more likely you are to achieve your financial objectives; an increasingly common stated goal, particularly in the States, is FIRE – financial independence, retired early.

FIRE – financial independence, retired early

It is not uncommon now for graduates to toss their mortar boards in the looming shadow of more than £50,000 of student debt, and under the current regime, interest is heaped on at a punitive RPI + 3% – and is forecast to hit 12% later this year.

The manifest inequity of the current system will almost certainly force the current administration to make some concessions when its twelve month investigation into student finance finally reports, but for many the damage is done; the fact that 70% of student debt is never paid back should be seen as a big question mark over the highly debatable ‘graduate premium’ rather than something to be trumpeted as a positive.

To compound their woes, the vast majority have never been taught even the basic skills of personal finance, essential knowledge required to succeed in this world; fortunately, most can make a marked difference and get closer to achieving their goals by addressing three financial imperatives.


1 – set your destination, and plan your route


Never has the old adage ‘if you don’t know where you’re going, any road will take you there’ been more pertinent; without knowing where you’re going, how can you expect to get anywhere?

Without identifying and setting firm goals, and then adopting specific, measurable, achievable, relevant and timely (SMART) milestones, there can be no financial plan.

The first step is work out what you want for yourself, and what your priorities ‘feel’ like; there is little point in embarking upon an ambitious investment strategy if your debts are keeping you awake at night.

work out what you want for yourself, and what your priorities ‘feel’ like

Create a wish list of your personal objectives – is paying off student debt a priority, or maybe building a ‘rainy day’ cash reserve; you may be more inclined to seek the security of buying a home ahead of starting a family; remember, there is no right or wrong, this journey will all be about personal aspirations and circumstances, and your thoughts and ambitions may change over time.

However, it’s your life, and therefore ‘it’ as an objective has to be heartfelt and personal; and guess what, just as many will have signed on the dotted for a degree course without having a clearly defined career path, it is acceptable not to have all of the answers from day one.

Sometimes it takes a while to work out what ‘it’ looks like, so it is worth spending some time cogitating; however, ‘it’ can get more difficult to achieve the longer you delay hitting the ‘go’ button to confirm your commitment to achieving your financial goals.

Once you’ve agreed them with yourself, write your key objectives down, and then quantify them by both time and value; precisely when do you want to buy that house and how much is it going to cost? This should be applied to each of the individual goals that make the cut.

Once you have set out your objectives, they need to be arranged in an order of priority; to which end will you apply your first pound, and which objective will you have to forego, or perhaps postpone, if things do not go to plan?


2 – go with the flow


Mastering cash flow involves getting to grips with two key concepts – budgeting and reconciliation.

Outside of a pretty nerdy minority, few would claim that budgeting is fun, but it is an important statement of commitment and a critical step to understanding where your money is going; all that avocado toast and the endless stream of flat whites that the ‘Boomers seem to think you gorge yourself on, can amount to a pretty penny.

Understanding where you are spending your money may be enough of a revelation to trigger a change in behaviour that could deliver handsome benefits down the line.

Considered elsewhere on this site, there is now a whole raft of microsavings and microinvesting apps that can lend a hand in tracking your spending and some offer additional budgeting and planning tools that can ‘learn’ how much you might be able to afford to save or invest, and some allow you to sweep spare change into a separate account.

avocado toast and the endless stream of flat whites that the ‘Boomers seem to think you gorge yourself on

However, budgeting needn’t require anything more than basic spreadsheet software, or even a good old pencil and paper; put your budget together category by category, and write down what you hope to spend in each.

Reconciling your cash flow means going back to see what you actually spent in each category; this is where the learning happens because cash flow shows us a true picture of our spending which can be the catalyst for changing behaviours.

Undertaking a cash flow exercise on a regular basis is a good, basic personal finance discipline and can allow you to accurately predict your expenditure some months in advance; there are many ways to improve your levels of financial education without expending an undue amount of time and effort.


3 – invest when the time is right


If cash management is the meat and potatoes of a personal financial plan, then investments have to be the rather piquant gravy; what could set the pulse racing more than assuming risk in the hope of achieving significant reward?

However, as exciting as investing can be, millennials need to ensure that they have ‘earned’ the right to invest, and that they are not chasing investment returns in lieu of a prudent financial plan that includes all of their income and expenditure.

Addressing the first two issues – setting your objectives, and understanding your cash flow – should give a pretty clear indication of where the individual is in terms of their readiness and ability to invoke an investment strategy.

Most millennials have cash intensive short-term goals – things they want to address in the next 0-4 years – before they can get to the longer-term goals that require investing.

Time and compound interest are the millennials’ friends

Clearly it makes no sense to service debt at a higher rate of interest than could realistically be achieved from investing, and most would counsel on the wisdom of establishing a healthy cash reserve or ‘rainy day’ fund, which is generally defined as 3-6 months of living expenses.

However, once basics have been established, and you are confident that there is a little left at the end of the month that could be put to work, then could be the time to set out an investment plan; little and often, over a long period of time, can make a significant difference when it comes to outcomes.

Time and compound interest are the millennials’ friends; even small investments via microinvesting apps or possibly a robo advice platform that has a low minimum investment can add up to something significant down the line; establishing a habit of saving or investing is crucial, and sooner rather than later is rarely a bad idea.

Digital investment managers – robo advisors – serve up and manage a portfolio of investments designed to help you achieve your financial objectives with a level of risk that is in line with your own risk tolerance.

Separate investment pots can be established for each of your personal objectives and a different risk profile can be established for each of the pots; most will also allow you to benefit from the tax efficiency of an ISA wrapper, and some will allow you to save for your retirement via a self invested personal pension – SIPP.

It is worth spending some time looking at the choices that exist, because there is quite a wide variation in the platforms that are collectively dubbed robo advisors; a little time spent here should help you find the one that most closely matches your requirements.


The prospect of setting a personal plan can be daunting, but addressing these three basics can help you establish a solid financial foundation.

The digital revolution is democratising financial planning and investing by bringing tools and access to products that in the past had been the preserve of the professionals in the Square Mile, who charged handsomely for their guidance.

Now, with a little application, it should be possible for anyone to find a solution that supports them at their particular stage in their journey toward financial freedom – Do it Yourself, Do it With me, Do it For me – just don’t do nothing!



Millennials and Gen Z agree on the definition of financial success; and it’s not being rich

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