23rd August 2016 at 10:24am
Einstein believed it was experience that shapes our wisdom when he was quoted saying “the only source of knowledge is experience”.
And if recent research is to be believed, the great theorist may well be correct.
An age of experience
A study by the University of Texas found men and women of at least 60 years old are better at making decisions which will reward them in the long term. However, those in their 20s and 30s are interested only in instant gratification and cannot see the benefits of planning.
So if older really does mean wiser, surely it would make sense for these ‘savvy’ sixty somethings to be sharing their wise counsel with our ‘live for the moment’ millennials?
Preaching from the converted
It’s certainly a sentiment that’s being supported by finance expert and “millennial” – Iona Bain. She believes it’s never too early to start financial planning and it’s vital that the older generation share their experience with younger ones.
Author of “Spare Change – the ultimate 21st century guide to bossing your finances” and an accomplished writer for both the Independent and Sunday Times, we thought Iona would be well placed to give us more insight on the subject.
Financial planning – what does it mean to you?
You’ll often find sensible financial planning is associated with older people, or the wealthy. But what it really boils down to is being proactive rather than reactive when it comes to your money. Many people only deal with financial issues when they become problems. A classic example is only addressing debts when the bills have started to mount up – by which time it’s more difficult to ask creditors for leniency. To me there’s a connection between financial planning and life coaching; making sure you have a healthy relationship with your finances.
So what’s the advantage of being proactive?
Problems are easier to resolve when addressed early, and solving them also brings with it a positive mental effect. Being reactive can prompt a sense of dread and guilt, whereas being proactive, and planning for the future, can mean feeling positive and hopeful. Which is why financial planning doesn’t just make sense on a practical level – it makes sense emotionally. And it doesn’t just apply to older, richer people – it applies to younger people too.
Are young people influenced by their parents or guardians when it comes to money?
Without a doubt – they often copy the habits of their parents. When working on my book Spare Change, I researched the extent to which our financial behaviour is determined by our upbringing, compared to the culture we live in. And so much of it is down to our parents – not just what they told us (or didn’t tell us) about money, but the way that they handled it themselves.
So what effect do our parents’ habits have on us?
Our parents’ influence on our attitude towards money can go in two directions. We might understand and appreciate why our parents approached money in a certain way and use it as a template. Or, we might consider that it had a negative impact on our lives as we were growing up – and strive to do the opposite. And although an individual can obviously change their habits, it’s widely recognised in many quarters that a person’s attitude to money is formed by the age of eight – an astonishingly early age.
Is it enough just to hope you are setting a good example for your children?
No, parents need to talk about money too. That’s because each generation is born into a completely different financial landscape. For instance, young people today are dealing with issues their parents never had to face, a classic example being the problem of student debts. So opening up a conversation with a young adult and encouraging them to start financial planning is as important as setting a good example for them to follow.
Is it possible to start financial planning too young?
It depends – with few resources; it’s very difficult to start the process as it involves looking into the future, which has too many unknown quantities. But if, for example, a young person has more resources, such as a family willing to support them, or good job prospects, then they should be thinking about financial planning when they leave university. It might be as simple as deciding whether to rent or start saving for a deposit on a property – but that’s still planning.
The bottom line
That unique advantage that millennials have, time, is something that all other generations envy. And the exclusive advantage the older generation have over younger ones, experience, is something other generations struggle to replicate. Marry the two through shared learnings, it gives millennials a real chance to capitalise on that precious time and the older generation a chance to leave a learning legacy they can feel proud of.
The information in this blog or any response to comments should not be regarded as financial advice.