CashNews.co
Few of us learned about money at school. Even if we had the odd lesson, it was likely to have been occasional, fleeting and forgotten by lunchtime. It means we pick up most of our money knowledge as we go along, leaving plenty of people with worrying gaps.
So, when do people learn key money lessons in life?
Before the age of 20
On average, people understand about savings at the age of 17 and a half, according to research by Hargreaves Lansdown with Opinium.
However, people only tend to get to grips with interest rates just after turning 19, so could easily go astray in the interim.
If you know anyone who is starting to save for the first time, it’s worth talking to them about the best savings rates — and the fact they’re rarely offered by the high street giants.
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We pick up some of the key details of borrowing just before our 20th birthday. We might have had some experience of credit cards by then, and learned tough lessons about the importance of paying in full and on time each month.
Plenty of people will also have learned the hard way about how much it costs to dip into their overdraft.
If you’re starting out and don’t have a handle on debt, it’s worth talking to friends and family about some of the basics, to give yourself a chance to learn the easy way instead.
20s
This is the decade when get most of our financial education. At just over 20 and a half we learn about inflation. It’s a vital lesson for anyone making plans for the future, and may well be when we realise that our savings are unlikely to keep pace with inflation over the long-term, which is when investment becomes part of the picture.
At the age of 20 and a half, we learn what a share is. This is excellent news, because the earlier we get started with investment, the better.
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However, it takes us until the age of 23 to understand investment, and until just after our 23rd birthday to learn what a fund is. This is notable because funds are often a sensible first step into investment, so there’s a chance younger investors are missing out.
We also tend to get to grips with mortgages between the age of 22 and 23. This is impressive, because it’s well ahead of the average age to buy a first home. It shows how key property is to our plans even from an early age. It’s one reason why it’s worth considering a Lifetime ISA, from the age of 18, when you first qualify to get a government boost on your savings for a first property
30s
Some lessons come later. It takes us until we’re almost 30 to learn the rules around pensions – which we pick up at 27 and a half. This is understandable, because there are some relatively complicated rules to get to grips with. But while you’ll automatically be put into your pension at work — so you won’t miss out entirely, it means you won’t be making the most of your pension — and you won’t know if you’re contributing enough or investing it effectively.
The survey also revealed shockingly large numbers of people who said they still didn’t understand key concepts at their current stage in life. Most common was pensions — almost a third of people don’t understand them (32%). The next was investment, with 27% of people not understanding what a fund is and a quarter of people not understanding investment in general (24%).
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This is one reason why we’re massively underinvested in the UK, so it’s worth taking the time to get to grips with it, so you can get your money to work as hard as possible for you.
The other common gap is around mortgages — almost one in five people say they still don’t understand them (19%). This is a particular risk when rates are relatively high, because it could mean borrowers sit on their standard variable rate, paying over the odds for their loan, because they don’t realise they could pay less on a tracker. Alternately it could mean they don’t realise the benefits of a fixed rate mortgage, and having certainty over their monthly outgoings.
Whatever your age, it’s worth considering where the gaps in your knowledge are, and how to close them. It may feel like something you should have been taught at school, but you’re never too old to learn how to have a more rewarding financial life.
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