What to teach your 20-something self, about pensions?Posted: 2015-08-05
I have volunteered to do a simple class at work for a few younger folk about pensions. I’m promising them Five Simple Things to know about pensions / saving. What should I tell them?
My audience are young, ambitious Londoners. They earn between £20k and £40k. None are yet parents. All aspire to get on the housing ladder. They are smart but not obviously financially literate. They know pensions are an important matter but it wouldn’t be urgent for any of them.
Asking myself what I would have wanted my future self to tell me about pensions/savings/similar when I was approaching my 30th birthday, I am musing over:
- The rule of 70, and the importance of doublings. And thus the importance of starting early.
- The impact of fees and taxes.
- Pensions (a tax bribe now, to bet on the government not stinging you later) vs ISAs/divi allowance (the place to feed assets into, if you quite sensibly don’t like pensions).
- Auto-enrolment. How it works, and why you should accept any employer match like your life depends on it.
- Diversification: the only free lunch. And your insurance against Equitable Life, MF Global, etc.
This still leaves such chestnuts as:
- Pay yourself first.
- Rich dad, poor dad. Don’t keep up with those Jones.
- What is equity? What are dividends? What is a P/E ratio?
- Your age, in bonds. The rest, in equities.
- Tax breaks on housing
- And many others….
If you could only cover five things, what would they be? Have I got the priorities right?