It’s been a busy week in the media for Progeny as we have secured coverage in the broadsheets over the past few days.
Firstly, on Saturday (3rd Feb), our Managing Director, Neil Moles, was called on by The Times to give his advice on how we can teach the current generation of young adults to prepare adequately for their financial future.
In the piece, ‘What to teach millennials about their finances’, Neil described the likely financial landscape facing many millennials these days. He noted that sufficient future planning isn’t solely about getting on the property ladder, which itself, for some, could still prove beyond reach:
“The days of final-salary pension schemes are over. If millennials aren’t building up capital in bricks and mortar then they need to supplement this by putting more into long-term investments for their retirements.”
“Pension savings can be accessed at age 55, a long time before many people actually retire. Although this age may rise in the future, having a large pension fund could mean that they can get extra cash in midlife.”
The article went on to consider inheritances, with many young people believing that they will inherit assets in later life which they see as a magic wand that will solve all their financial problems. Neil said:
“We come across a lot of 40-year-olds who say, ‘My future is fine because I will inherit a house.’ That may not be the case because people are living longer and have care costs to pay. As a society we have to be careful about how we protect money for future generations and that millennials don’t have to spend it all on their retirement.”
Neil explained that encouraging young people to save and invest virtually can be a good way to break down some of the apprehension they might feel towards it. There are simulator portfolios available online where it’s possible to virtually invest in the shares of real companies and see their prices rise and fall throughout the day.
Read the full article here.
On a not dissimilar topic, on Tuesday (6th Feb) The Daily Telegraph published a reader case study in their Money Makeover series, ‘How to invest for the very young’, asking for advice on the investments that the parents of a three-month-old baby should be making for their child’s future. The piece was later published online, slightly amended and under a new title, ‘Money Makeover: with shares in freefall, is now a good time to invest for my three-month old baby?’.
Neil gave his views on the most effective ways for the parents to build up the investment for their son over time, and for how to start introducing him to the concepts of risk and return, a lesson which will stand him in good stead throughout his financial life:
“Investing small amounts over an 18-year investment time horizon means that the Whites are likely to be able to ride out fluctuations in the stock market, benefiting from two great features of long-term investing: the purchase of additional assets at times of stock market lows and the compounding of gains over time.
“Clearly markets are volatile right now, but investing money monthly or on a regular basis would help to reduce the risk of any investment, by averaging out the prices paid– known as pound cost averaging. It’s actually a huge positive to be able to buy at a variety of prices. If markets only ever go up, you buy a diminishing amount of an investment each time.
“There has been fantastic research done on investor behaviour, that shows investors should stick to strategies they had previously adopted, when something such as a fall in markets tempts them to do otherwise. So, if the plan was to invest £100 a month before, that should be the plan now.
“A low-cost fund that invests in a range of assets and geographical sectors, such as Black Rock Consensus 70, would be ideal. Investing £4,128 per year in a Jisa (Junior Isa) over 18 years would result in a lump sum of about £98,000, assuming annual returns of 4pc.
“Junior Isas do not allow access until the child turns 18, when they can do what they like with the money. But from 16 [their son] can take control of the account, which will help him understand investment and risk, a valuable life lesson.”
“When he turns 18 the funds held in his Junior Isa can be transferred to a Lifetime Isa. Up to £4,000 can be paid in each year, which the Government tops up by 25pc. The money saved can go towards Mateo’s first property purchase. Alternatively, the Jisa could be converted into a stocks and shares Isa to fund other things such as marriage or the purchase of a car.”
The father of the couple was also interested in investing in property abroad and considering remortgaging their property in London to fund the purchase of a buy-to-let flat in New Zealand. Neil urged caution on this strategy:
“When we look at Mr White’s interest in a buy-to-let property, he would be borrowing to invest, which only increases the risk involved and is something I’d strongly advise against. But they should also consider pension contributions, as these benefit not only from tax-efficient growth but from upfront tax relief, boosting any initial contribution.”
Read the full article here.
If you would like any help in growing and preserving your wealth for the future, whatever your age, please get in touch.
This post updated Monday 12th February to reflect publishing of and amends to The Telegraph piece online on Sunday 11th February.