Seven financial ages of man

To reach the milestones most of us want to hit takes careful planning. Chiara Cavaglieri offers tips on how to succeed

We Britons are an ambitious lot, wanting to achieve all of our key life goals in just 20 years, from getting our first job at 18 to reaching the peak of our careers by age 39, according to a new Aviva report, Times of our Lives.

The study, which charts the goals, worries and wealth of adults aged 18 to 65-plus in the UK reveals the ideal ages we pick to meet major milestones and while they may be optimistic, how can you better your chances of success and what are the financial implications if you do get everything you want?

Age 18: Get first job

A first job is often special, but a first pay check is even more so and while it may be tempting to splurge, even saving a token amount is worthwhile. Living at home is prime time for early savings and avoiding debt so steer clear of store cards and credit cards. Even modest amounts build up nicely over time so this is about getting into the saving habit. “Budgeting is the key to financial security and good habits started at 18 when you first get a job will build firm foundations,” says Danny Cox, from independent financial adviser (IFA) Hargreaves Lansdown who recommends operating two accounts, a current account for day to day use and a Cash ISA for savings. If you pay yourself first so that your monthly savings leave your current account on or shortly after pay day this reduces the risk of running out of the money by the end of the month and not having anything left to save.

Age 20: Buy a car and start saving or investing

Young drivers living at home may well be tempted to take out a big car loan and buy something flash but David Gibson from IFA Gibson Financial Planning urges caution. “ Unfortunately, I speak from experience. I wish I’d saved that few hundred a month instead. The difference in starting saving at 20 rather than 25/30 is remarkable. Those extra few years make all the difference,” he says. If you do buy a car, start with a small engine and take a Pass Plus course as insurers may offer discounts on your insurance premiums. You could also try specialist providers such as Insure the Box and Young Marmalade which offer black box technology. At such a young age it makes sense to focus on saving rather than investing but there are reasons to develop an investment portfolio, for example, you may be lucky enough to have too much cash, interest rates may be particularly low, or your cash savings could be eroded by high inflation. If you are going to dip your toe in the investment world, it is worth remembering that equities have outperformed cash and gilts 99 per cent of the time in any given 20 year period. “Each individual is different and some can’t stomach the rocky ride of the riskier investment portfolio, but taking good advice from a financial planner can, literally, reap dividends in later years,” says Mr Gibson.

Age 21: Move into your own home and start a pension

You may aspire to rent your own flat, but Kusal Ariyawansa from IFA Appleton Gerrard Private Wealth Management says paying a landlord and getting a loan is a waste of time at that age. “The reason many people struggle is due to the strains of expectations versus reality. Should you really move out of your parents’ home at 21 unless they insist? Why not pay them rent instead?” he says. “If you do what others do, you’ll probably end up where they are … so why not think outside the box?” budgeting carefully is even more important and if you want to be financially independent it’s crucial to create a safety net to cover any unforeseen events. Advisers suggest putting aside an emergency fund of around six months’ worth of expenditure. As a twentysomething you can expect to pay into a pension for at least 40years – as things stand the state pensionwon’t be paid until age 68. Over such a long period, this is the ideal opportunityto take on more investment risk using high-growth areas such as emerging markets to aim for the best possible returns over the long term. If you have the opportunity to join a company pension scheme, do so and you could benefit from matched employer contributions. Auto enrolment intoacompany pension scheme begins in October 2012 and will apply to employees aged 22 or over.

Age 25: Buy a car and start saving or investing

The adults in Aviva’s poll may believe that 25 is the ideal age to buy a first home but it is unlikely for many in the current market as the national average first time buyer is aged 29. The biggest hurdle is the deposit but the larger this is, the better the termsyou can secure on your mortgage. Opt for a repayment mortgage, rather than interest-only, so that you are paying off the capital. Those that can afford to will do well to get on the ladder as early as possible but don’t rely on future increases in property prices to repay your mortgage – it’s crucial that repayments are affordable even if interest rates were to rise.

Age 27: Get married

Aside from the cost of some weddings, asamarried, or committed, couple the biggest threat to financial security is theloss of earning power. Insurance can provide cover if you or your partner were to die, or be not able to work due to accident or illness. Unmarried couples have no rights in law so you also need to draw up a will, says Mr Cox. Your employer may also offer benefits such as death in service or salary replacement insurance, so always check your entitlements.

Age 29: Have first child

Having a child isn’t simply about wanting a family – it must also be a financial decision as the cost of raising children until their 21st birthday stands at a colossal £218,000, according to a recent survey by insurer LV=. Childcare and university fees are the big ones but with the introduction of Junior ISA’s last year, you can start building up a tax-free nest egg for them, with family and friends allowed to pay into it, up to £3,600 per year. There is also Government help for families. Visit turn2us.org.uk to see which benefits you are entitled to.

Age 39: Career peak

At this age, you need to get to grips with your tax position to make the most out of tax breaks. The under- 65s pay income tax at 20 per cent from £8,105, 40 per cent at £42,475 and 50 per cent when earning £150,000. At £50,000 child benefit will decrease so financial planning around these thresholds can make a big difference. “If saving for a pension, people should focus on their income patterns as well as their age,” says Jason Witcombe from IFA Evolve. “If someone earns, say, £35,000 now but with a promotion might be earning £45,000 in a couple of years they should consider holding off on extra pension contributions until their income goes up.” 

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links