Rising house prices and a tough economic climate have created a generation of Peter Pans who can’t afford to grow up – or so the headlines suggest. But today’s “kidults” may be more financially mature than they think.
Iona Bain is a freelance journalist and money blogger.
A generation stuck in expensive rented accommodation or forced to check into the B&B of Mum & Dad. As a result more and more of us are delaying the traditional milestones of adulthood like marriage and having children.
The average age at which we buy a home has been pushed back from 30 in 1996 to 33 according to the government’s 2015 English Housing Survey. But is the image of millennials splashing out rather than squirrelling away entirely fair? And when exactly is someone “grown-up” enough to start investing anyway?
So if you’re in your twenties and still feel like a kid, that’s because you are (no offence). Scientists have dubbed this form of neural flexibility a form of “kidulthood” and it’s nothing to be ashamed of. Rather than trying to prematurely halt your desire to seek out novel situations and pleasure, some scientists now think we should let nature take its course.
As Professor Beatriz Luna from the Pittsburgh School of Medicine puts it: “When the environmental demands are those that require you to become a responsible adult, meaning you have a lot of responsibilities to take over, that might be signalling the brain to stop a certain type of plasticity because now you really need stability and reliability.
“Having the freedom to play a bit longer in life might be a good thing.”
Working through your need for instant rewards is also vital if you’re going to make a success out of your finances in the long-term. The Marshmallow experiment conducted by Stanford University in the late sixties and early seventies found that young children who could resist a juicy treat in order to get two later on were healthier, wealthier and happier once they grew up. Delaying gratification, was the key to managing your practical and emotional life well.
It’s also crucial in the world of investment. You need to be prepared to part with your money for some time for any realistic chance of growth. While there are no guarantees, and past performance does not necessarily reflect what will happen in the future, history has shown that investors who stay in the stock market for at least five years have a very good chance of making a return.
So how do you know if you’re ready to start investing? The very fact that you’re showing an interest demonstrates that you may be “grown-up” enough to make plans for the future, whatever your personal circumstances. You don’t need a fixed goal in mind, although it really helps to invest for a specific goal such as first home or your pension. The early bird really does catch the worm, with a huge difference in your pension wealth if you start saving NOW.
The main questions to ask yourself are “do I have capital to spare?” and “can I tie it up in markets for at least a few years?”
If the answers to both questions are “yes”, you may well be ready. Only invest money that you can afford to lose and be prepared to figure out how much risk you want to take. Knowing more about different asset classes can also help you choose how and where to invest.
Nutmeg requires a minimum starting contribution of £500, with a £100 monthly contribution thereafter. That’s £25 quid a week.
Also, don’t forget to have an emergency savings pot that you can access immediately – three months’ living expenses is a good rule of thumb.
So, you may well be able to invest in your future AND still enjoy life today. Win win.
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