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Want to become the CEO of your finances? Here's what the experts say

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File photo Copyright Geert Vanden Wijngaert/AP
Copyright Geert Vanden Wijngaert/AP
By Simone McCandless
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Young people can often be accused of having poor financial habits. However, data shows that many people in their 20s are already practising healthy spending habits. Euronews spoke to some financial experts for their views on how best to invest.

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According to Hargreaves Lansdown's Savings and Resilience Barometer, it is estimated that 30% of 20 to 24-year-olds have "just in case" savings, and that figure rises to 53% for 25- to 29-year-olds.

That's despite those in their 20s only having about £10 per month left of their income to put aside, while those aged between 25 and 29 have a disposable income of about £81 per month, Emma Wall, head of investment research and analysis at Hargreaves Lansdown, explained to Euronews.

However, creating your financial blueprint can seem intimidating at a young age, but it can be done.  

Planning ahead for your future

Behavioural economics is a useful term to know. It refers to what comes into play when you make financial decisions. For example, it suggests that most people are much more likely to gravitate towards their current needs rather than focus on future necessities, such as investing for retirement.

Hargreaves Lansdown's head of personal finance, Sarah Coles, said: "Fear not. With a bit of planning, it is not necessary to sacrifice all for your future self. In your 20s you have time on your side, and the power of compound interest to harness."

Essentially, this means allowing time for your money to grow.

Coles also noted that it's important to assess any investment carefully as all investments come with risks and there is no promise of high returns. 

Historically, investment returns are better than cash deposits. However, savings accounts are also necessary for short-term goals, such as holidays or unexpected bills.

Coles further highlighted the importantance of having enough cash put aside to cover at least three months' worth of essential spending, in other words, having enough money set aside to keep you afloat in times of financial troubles.

"Setting up a direct debit on pay day means you don’t need to remember to prioritise your financial health each month. Most platforms allow you to set up a regular investment plan from just £25 a month," Sarah Coles added.

What Investments should people in their 20s look for?

If you are at the start of your investment journey, it can be hard to identify where to begin. A vital component to the investing process is educating yourself about different types of investments and what correlates best with your financial goals and current circumstances.

 When you are navigating through your 20s, you are in an accumulation stage - you are obtaining money from, and paying into, your investments, instead of relying on them for income in retirement. That said, you have a long-term opportunity, which means you have time to build your financial portfolio, which essentially is made up of a collection of all of your financial assets, such as bonds, stocks, shares and commodities. 

 Emma Wall of Hargreaves Lansdown is of the view that "between 80 to 100% of your portfolio should be in equities, with around half of this allocation in US stocks, a further 10% in UK stocks, 10% in Europe, 5% in Japan and the remainder in emerging markets".

Another option suggested by Emma Wall could be to buy a single fund that is a combination of cash, stocks and bonds in a single investment.

Current investment trends for people in their 20s

With constant technology innovation and the growth of "finfluencers" on social media platforms, many young people find it significantly easier to access financial information and investment opportunities. 

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According to an opinion survey of 2,000 people for Hargreaves Lansdown, some 21% of investors between the ages of 18 and 34 receive market forecasts and stock advice from Instagram, 16% gravitate towards Facebook for financial advice, 14% were inspired by Reddit and 8% looked to TikTok.

Naeem Aslam, chief investment officer of Zaye Capital Markets said: “While Gen Z may believe that there are numerous open and free resources available for them to obtain useful information for their investment decisions, which often aligns with reality, it's crucial to recognise that experience is the most valuable factor. 

"What we mean by this is that a financial adviser, having seen similar situations before, would have better experience in investing, diversifying the available capital, and producing a significantly higher return."

Essentially, seeking financial information at any age is a good idea, but make sure you treat it with caution especially if it comes from unregulated sources where you will have no protection if anything goes wrong. It is also important to set aside time to verify information or additional research on any new ideas you may have discovered. It's always best to discuss with a financial professional before making any hasty decisions.

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 A reminder, the information in this article does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances. Also remember, we are a journalistic website and aim to provide the best guides, tips and advice from experts. If you rely on the information on this page then you do so entirely at your own risk.

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