Your Money

Why getting (proper) financial advice when you’re young is a good idea

- April 5, 2022 3 MIN READ
Financial advice when you're young

Seeking financial advice when you’re young means you can really reap the benefits. Here’s how.

Around the start of the pandemic, another strange virus started taking over social media. ‘Finfluencers’ cropped up everywhere, scattering colourful memes full of pithy financial advice with a dose of rah-rah positive psychology.

These financial influencers want to pave your way to wealth and early retirement, but sadly most of them should come with a ‘don’t try this at home’ warning.

The Australian Securities and Investments Commission (ASIC) recently issued a warning to finfluencers and the companies who engage them to promote their products.

“A finfluencer may be collecting remuneration from multiple sources simultaneously,” says ASIC Commissioner Cathie Armour. “They may be generating income from content clicks or views, which may give rise to a conflict of interest or result in advice that’s not in consumers’ best interests.”

The Commissioner also mentioned that finfluencers are often not licensed to give financial advice and may be involved in “pump and dump schemes”. This is where the influencer buys shares in a company and then uses their social media platforms to generate excitement to “pump” or increase the share price.

Yikes, it’s fair to say that getting your financial advice on Instagram and Tik Tok probably isn’t what’s best for you. But don’t let finfluencers turn you off financial advice altogether. They are not the same thing.

Here’s how getting good financial advice when you’re young can have a huge impact on your long-term wealth.

Early retirement, anyone?

The government is raising the official retirement age to 70, but lots of us would like to clock off a few years before that.

Unfortunately the ever-increasing life expectancy in Australia means this goal might not be realistic. More time in retirement means more money is needed to fund our lifestyle as we age.

Research from the Financial Services Council showed that a 30-year-old who seeks professional financial advice could conservatively save an additional $91,000 by age 65 compared to someone who doesn’t. Which could make all the difference to when you want to hang up the boots.

For someone who starts at 45, the benefit falls to $80,000. While a person who’s 60 would only be $29,000 better off.

So for people looking to retire comfortably and without worry – maybe even a few years early – advice could make all the difference.

Time’s on your side

Young people are in the best possible position to benefit from compounding returns on their investments, which over time can really add up.

According to Fidelty, over the 30 years to December 2020 the Australian stock market returned on average 8.55 per cent a year with dividends reinvested. This means a $10,000 investment in the index in December 1990 grew to $177,299 by December 2020 – not a bad little nest egg.

A financial adviser can help young people make the most of this opportunity by putting a long-term investment plan in place.

Young people have more spare cash

Young adults generally have fewer financial commitments than those struggling to bring up kids, pay the mortgage and keep up with the Kardashians.

The Australian Institute of Family Studies estimates that it costs just over $340.14 a week to raise two kids. Or $17,687.28. Canstar estimates that the monthly mortgage repayments on an average new home loan is $2,697, or $32,364 a year. And keeping up with the Kardashians costs approximately eleventy-billion dollars annually.

So it makes sense to be saving and investing as much as possible at this stage. Before all of those pesky and expensive commitments become a reality.

It’s never too early to start planning

When you’re young, there’s a lot of big picture stuff going on. From finding ‘the one’ to building a career and travelling the world, it can be rollercoaster ride.

So it’s understandable to not spend too much time thinking about things like investing, retirement or insurance.

But life moves pretty quickly. No one knows what’s around the corner. So it’s never to early to put a plan in place for the future.

Getting financial advice when you’re young means can get all of that boring but important stuff out of the way. Then you can focus on the more pressing, exciting and equally important life stuff.

So if you’re at this stage of life, or any other for that matter, ignore the finfluencers. Instead, find a trusted and reputable source of licensed financial advice to get the ball rolling today.

You’ll thank yourself later.