South Africa’s young people including those in their 20s face a number of challenges such as youth unemployment and tough economic times therefore it is important that the younger generation have good financial habits.
Healthy financial habits must be based on empathy and a keen understanding of the unique pressures that young South Africans face, according to financial expert and author Sam Beckbessinger.
Beckbessinger said: “The key to promoting sound financial acumen amongst the youth lies in making the fundamental shift from talking about money in terms of products, to talking about it in terms of principles.”
Kerry King, advisory partner at Citadel, said that it is never too soon to begin building your wealth and planning for your financial security.
“Starting as soon as possible is key to accumulating wealth but can prove to be challenging for the younger generations as they are faced with family responsibilities, as well as lifestyle pressure from friends and social media,” King said.
Here are four ways young people in their 20s can work towards financial wellness:
Value of time
According to Beckbessinger, the concepts of “power of compound interest” and “time is money” are more literal than many people may realise.
“A vampire invests R200, and without adding any additional investment to that initial amount, he earns R1 billion over 200 years,” Beckbessinger said.
“The most valuable thing that young people need to know is that time is the most important contributing factor to wealth growth.The same can be said about debt, where the longer the indebted person takes to pay off the debt, the more expensive it becomes.”
Pay cheque to pay cheque
Beckbessinger said that young people should steer clear of living a life of paycheck to paycheck.
Young people can avoid this lifestyle with a practical approach to financial management such as monitoring expenses using an app or reviewing their bank statements.
Financial scammers
Beckbessinger said that young people must avoid falling into the trap of get-rich quick schemes.
“One of the tell-tale signs of a money scam is undue and relentless urgency to make a deposit or financial commitment. If you’re being pressured to make a rash decision, you’re most likely being scammed,” Beckbessinger said.
“Arguably the best-performing asset class is the stock market, which historically has earned investors 7% above inflation. Individuals should be wary of any person offering higher returns than these or claiming to be able to offer guaranteed returns.”
She advises young people to check the websites of local financial services boards to make sure the people that they are investing with are regulated.
“Regulated companies and products are generally safer.”
Get good advice
Beckbessinger said that due the growing number of financial scams, good financial advice has never been more valuable.
“Trustworthy financial advisers will be upfront about their fee structure and will have transparent and official policies and contracts in place. They will also be open to answering any questions to ensure that their clients make informed decisions based on solid financial principles,” Beckbessinger said.
IOL Business