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As I’ve transitioned into adulthood over the last few years, I’ve realized how much impact our upbringing has on our attitudes toward money. It’s well-known that parents play an important role – but what about the generation we grew up in?
I was ten years old when the financial crisis hit, and I remember everyone constantly talking about ‘the recession’ when I was growing up. Another thing I couldn’t escape was the negative press regarding Millennials. About them working part time retail jobs despite having degrees, being locked out of the property market forever, and having frivolous spending habits.
If we believe the media narrative, Millennials grew up with high expectations that a new economic reality cut short. By contrast, I think Generation Z grew up thinking a good career and financial safety would be almost impossible.
It would be silly to take generational theory too seriously – other factors are much more important in determining who we are – but I believe that people born around the same time as me tend to be very risk averse.
This has some advantages, but can also be harmful – perceived ‘risks’ are sometimes not so risky at all. Here are some myths I’ve had to unlearn over the last few years.
Getting a credit card is irresponsible
Before starting university, I signed up for a student bank account. I remember feeling apprehensive when I was told my account came with a credit card – my mind had many negative associations with those evil pieces of plastic. I was too scared to use it most the time, worried I’d end up in debt as if by magic.
Looking back now, I’m not sure what I was so worried about. I don’t want to detract from the possible dangers of credit card debt, but chances are that people who worry about getting credit cards aren’t going to be the ones who end up racking debt. Each month I pay my balance off in full by direct debit, and that’s that.
If you’re financially savvy, the pros of credit cards will probably outweigh the cons.
A few months ago, I bought a transatlantic flight from a company that later went into administration. Luckily, I’d used my credit card for the purchase and could recoup the full amount of £186 ($241) with no issue. My boyfriend used his debit card and lost the money.
Then there are the extra perks. I recently got a credit card that offers 5% cashback in the first three months and 1% thereafter. Since I know I can manage my finances, getting that extra bit of money by using a credit card instead of a debit card is an easy decision.
Yet most people I know my age don’t have a credit card, even though they’re great at managing their finances. It’s the perfect example of taking risk averseness too far – if you know you won’t go into debt from a credit card, why miss out on additional consumer protection and free money?
Investing is only for experts
I procrastinated investing for far too long because I believed it was too risky and I might lose my money. Plus, I didn’t really understand what investment was or how to do it — I just had some vague notion it involved the stock market.
I’m not exactly kicking myself for not investing earlier –starting at 22 is still pretty early – but I’ve definitely lost a lot of money from keeping all my savings in a very low-interest account.
As a general rule, it’s true that investment is risky. But I didn’t realize that risk is basically eliminated if you invest over a long enough period. I’m investing now to give myself an income 30, 40, 50 years in the future – over that period, I’ll no doubt see steep declines, but I’ll also see huge gains. My money is guaranteed to grow as an overall trend (or, if it doesn’t, it would be unprecedented).
And I don’t need to be an expert about the stock market, either. I’m not actively picking and choosing shares of companies I think will grow — I’m simply investing in a diversified portfolio. This means some companies may crash, but others will boom.
I used to think that investment was reserved for experts who were able to handpick who they wanted to invest in and prepared to lose it all. It only took a small amount of research for me to figure all this out, yet most people my age are too intimidated to even start.
The truth is that long-term passive investment is a managed risk that anyone with an emergency fund can – and should – be taking. It’s actually far riskier to not invest; it makes your future self less financially secure.
Good money management is all about saving
A lot of people associate personal finance purely with pinching the pennies; I used to be one of them. I’ve always loved saving money — as a child I hated my purse going below a balance of £30 and would deposit my birthday money straight into the bank.
Yet the truth is that obsessing over saving money can hold you back in life.
I have one friend who always takes a coach to travel instead of the train to save money, even though the train is far quicker and you can work whilst you travel on it. I have other friends who refuse to get an Uber on surge price; even if it’s late at night and there’s no other form of transport available, they’ll keep walking around and waiting until the price drops. Sometimes, I’ve been that friend.
But funnily enough, being cheap always costs you in one way or another. It might cost you time. It might cost you generosity. Sometimes, it might literally cost you. Not buying travel insurance then being hit with a huge bill abroad or buying a cheap computer that breaks after a year are prime examples of this.
It’s a tricky one to navigate because I’m also a strong believer that it’s possible to build wealth without a high income — and this can only be done by saving. But I try to focus on avoiding lifestyle creep and keeping big, recurrent expenses as low as possible, like accommodation and transport.
When it comes to one-off expenses or items that are an investment for the future (like a high-quality coat or computer), I’m learning to take a gulp and accept it’s okay. At the end of the day, money is a tool.
Money can only come from wages
I’ve had my fair share of rubbish, low-paid jobs. My first was as a sales consultant at a shoe shop, which was an absolute nightmare. I only earned about £6 an hour, but I needed to buy the bus fare and a pair of shoes to wear in-store out of my own pocket – and I didn’t even have reliable hours. My second job was collecting online orders at a supermarket, which was better-paid and involved fewer expenses, but not exactly interesting.
At the time, I was happy to be earning money and starting out, but in retrospect, I’m frustrated that I didn’t try to think more outside the box. There are so many ways out there to make money that don’t involve a standard, wage-paying job.
As a freshly graduated freelance writer, I’m not exactly making a killing, but it’s enough to cover my (admittedly low) expenses and save a decent chunk on the side. It’s not like I suddenly became ‘qualified’ to do this – I could have started much earlier.
Without wanting to sound arrogant, I don’t think I’d ever take a wage job unless my motivation was pure passion, and I certainly wouldn’t take the kind of low-skilled job I did before.
Even if all my writing work dried up, there are many options for making money online. I could teach English, test websites, evaluate search engines — or even just take advantage of referral offers that offer a monetary incentive for signing up.
Over the last few months I’ve made £400 from switching my bank and referring three friends to switch too, and I’ve made a few hundred more through other online offers. When I was working a low-wage job, it would have taken me weeks to earn that much, but I’ve done it in hours.
I can understand why many people would deem it too risky to work online full time, but if all you’re looking for is a part-time job at minimum wage, it might just be the best option. Most people underestimate the lucrativeness and overestimate the riskiness of making money in ‘alternative’ ways.
Homeownership isn’t necessarily the best path
My parents drilled the idea into me that renting is pouring money down the drain, and it always made sense to me. Why would you pour your money into something you’ll never get it back for when you could be putting it towards an asset that will be yours forever?
But as I’ve learned more about renting and mortgages, it no longer seems like such a clear-cut decision. It didn’t occur to me that paying rent means your landlord is (technically) liable to pay when anything goes wrong in the house, but if you own the property, it comes out of your pocket. Then there are the furnishings. I also find that buyers can get caught up in the idea of needing their ‘dream house’, whereas it’s mentally easier to live somewhere just okay when you’re renting.
Getting into debt and tying up practically all my present and future money into one asset now seems riskier than investing in the stock market and taking advantage of compound interest.
That’s not the right choice for everyone – if you know you want to settle down in an area then it might make more sense to buy. I don’t even know which currently I’ll want to settle down in, so I’d rather have the flexibility and freedom of renting.
The bottom line
I’m tired of hearing advice to stop spending money on lattes and avocado toast. It’s patronizing and unhelpful. Most young people I know don’t have a spending problem – their biggest obstacle to building wealth is seeing risks where there are none and consequently limiting the growth of their money.
To master money management, we need to make the most of the tools available. Above all, that means investing and setting up additional income streams outside of the corporate world. Learning from past mistakes highlighted by the financial crisis is all well and good, but playing too safe can cost you in more ways than one.
Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.