My generation

Don’t let our youth go to waste

53% of 22 to 29-year-olds have no savings, according to the Office for National Statistics’ most recent Wealth and Assets Survey  [1]. And out of those that do, nearly 40% have saved no more than £1,000.

When I ask my friends, almost all of whom sit within this bracket, if they save, most claim they cannot afford to. They all pay ridiculous amounts of rent, have student debts and live that oh so glamorous, avocado-encrusted London lifestyle. I get it. What is the point in saving £200 a month just to get £65.48 [2] at the end of the year?

Yet we are constantly berated by society for not having the money to get on the property ladder despite house prices still being sky-high, and made to panic further because apparently our pensions won’t be enough to live on post-retirement. Oh, and we are living longer. It’s a vicious cycle making us demotivated and delusional and sometimes it feels like the only thing to do is ignore it.

But there is a solution: investing.

Yes, initial thoughts may jump to risk. But leaving to chance whether or not you will have the money to enter retirement comfortably is riskier. And that’s the bonus with investing now, while you are still twenty-something. Even if you can only afford to put away £50 a month, old age is SO FAR AWAY. In comes the investment trust.

Trusts have many structural advantages over their open-ended counterparts such as the option to gear, invest in more illiquid asset classes such as private equity and infrastructure and the opportunity to make so much more money if you enter a trust on a discount and over time it starts trading at a premium.

You do not have to worry about constant flows, redemptions and sudden suspensions as have been seen with OEICs. You can put your money away and almost forget about it. Most of us wouldn’t even notice that monthly £50 going out – it’s just another phone bill right?

But instead of ending up with a three-generation-old iPhone with a cracked screen at the end of the two-year contract, you could end up with some very attractive returns. Over the last two years, investing in Baillie Gifford’s Scottish Mortgage Investment Trust would have upped your initial sum by 40% [3]. Over a decade? Up by 600% [4]! A regular contribution would make this even higher.

Doing something new in any part of life can be daunting and even more so when money – and therefore its potential loss – is involved. But investment trusts have been around for over 150 years, standing the test of time and also two world wars and countless recessions.

But now with the help of trade bodies such as the AIC, new regulations pushing for greater transparency and less jargon, and the abundant supply of guides and information to be found online, investing doesn’t have to be daunting. In fact, once you get the hang of it, it is pretty straightforward.

But the most important thing is to start early. As more young people invest, one would hope the word spreads further and financial institutions realise they need to help this demographic more than anyone else. The wider public – and that includes schools – has a social responsibility to ensure we are aware of the benefits and risks of investing so we can make informed decisions as soon as possible.

Then by the time we reach retirement, we will be pleased to be able to buy all the avocados we want.

[1] Released in 2017, next is due mid-2019

[2] Interest I earned this month following the maturity of my 12-month regular saver account

[3] From 1 January 2017 to 1 January 2019 according to FE Analytics

[4] From 1 January 2009 to 1 January 2019 according to FE Analytics