What Harry (and everyone else) needs to be financially independent

Harry and Meghan aren’t the only millennials finding financial independence tricky to pull off...

Felicity Hannah
Tuesday 14 January 2020 14:32
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File photo of Queen Elizabeth II, Meghan Markle and Prince Harry.
File photo of Queen Elizabeth II, Meghan Markle and Prince Harry.

It’s only a week since the Duke and Duchess of Sussex announced their plan to retire from their roles as senior royals and seek financial independence – a move rather inevitably dubbed Megxit by people who only have one joke.

Their claim they want to “work to become financially independent” may have raised an eyebrow among those who know just how much it costs to run security for some significant personages.

However, among millennials it may have achieved more of a sympathetic nod. In fact, a new study reveals that 61 per cent of UK adults say they are not financially independent. The report, by King Street Wealth Management, suggests 15 per cent believe they never will be.

For millennials, the reasons are clear. This is a generation that came of age at a time of significant economic upheaval. House prices rocketed, rents soared and wages stagnated for long periods.

More of them went to university than any previous generation but they also have large student loans to contend with too.

The fallout from that has left many of this generation relying on parent support long after they have entered adult life – although perhaps not quite to the same lavish extent as His Royal Highness Henry Charles Albert David, Duke of Sussex.

Research from Royal Caribbean shows that 42 per cent of British adults aged 25 and over still go away on holiday with their parents and almost half of those parents always foot the bill.

The Bank of Mum and Dad funds more than one in four housing transactions in the UK, according to analysis from Legal & General and consultancy firm Cebr.

And research from 118 118 Money recently showed that one in five UK parents are still offering their grown-up children “pocket money” each month.

Of course, it’s quite possible that the Queen doesn’t fully sympathise with the costs facing Harry and Meghan. Many boomers don’t – only 13 per cent of older people know that under-35s’ households have to spend close to two-thirds of their weekly expenditure on essentials, according to research by the Intergenerational Foundation.

So, what is financial independence and how can any millennial achieve it more easily? Here are some ideas.

For millennials – get organised

Lots of us plan to save more; it’s a common financial resolution for the new year. But true financial independence takes more than just saving any leftover cash at the end of each month – it means taking control of your finances and making conscious savings.

Abbey Yearley, spokesperson at TopCashback, says: “For young people looking to fast-track to financial independence, there are many tricks of the trade that will help reach this goal.

“It sounds obvious, but budgeting and putting money aside at the start of each month will set you on the right track. It’s also worth implementing a long-term savings plan, and taking advantage of schemes such as the Lifetime ISA.

“When it comes to unavoidable outgoings each month, remember, it never pays to be loyal. Always shop around for utilities bills using comparison sites like TopCashback, as you’ll also get cashback on your purchases.

“Just by making small tweaks to spending habits, young people can strengthen the value of their pound to make their money go further and reach key landmarks earlier.”

Sarah Megginson, money specialist at ClearScore, says: “We might not be royalty or have amassed millions in wealth already, but many of us might also have the dream of becoming financially independent one day.

“If you’re saving for a home to become financially independent from your family, it’s never too early to get mortgage-ready. Check out your credit report and take any steps you can to improve your score, and make yourself more attractive to lenders. For example, getting on the electoral roll, correcting errors and making repayments on time can all contribute to a healthy score.

“Take stock of your finances – do you have any debts that you’re not paying off? Are you paying over the odds for credit, such as an overdraft? Do you have any money going into savings or investments?”

If financial independence feels unachievable then taking steps now to make it more possible will bring it forward. Just like Harry and Meghan, it takes work to achieve.

For parents – start early

Parents of younger children, or whose adult children are still firmly on the payroll, can also take steps to ensure their kids achieve financial independence.

There’s certainly an incentive. Analysis from Portafina, an investment management company, shows that it costs parents an average of £5,000 per year (£416.67 a month) to have an adult child living at home with them.

And one in 10 parents say they will need to continue to work longer due to the financial impact of their adult children living at home longer.

Jamie Smith-Thompson, managing director of Portafina, said: “It’s only natural for parents to want to give their children a head-start in life. For parents of younger children there are a number of things you can do now to help with financial independence in adulthood. It will mean you won’t need to find a big lump sum of cash when the time comes.

“From bank accounts, Junior ISAs and pensions, you may be surprised at some of the options available for parents to contribute to young children’s savings. It’s simple to get started with any of these, and there really is no time like the present when it comes to saving for their future.

“When it comes to helping their adult children, parents should take a moment to consider their own financial position. It’s great to want to be able to help, but it’s ok to say no if you feel it will be detrimental to your own plans.”

What if it feels totally impossible?

Even Harry and Meghan plan to keep living in Frogmore Cottage when they are in the UK, a residence that still belongs to Harry’s royal gran.

There are certainly many adults who still live at home. Mark Bodega, CMO of employee financial benefit firm Neyber, says that if you’re in this situation then it’s best to grasp the nettle.

“The first thing anyone looking to gain financial independence from their parents should do is draw up a list of all of the things you pay for such as food, mobile phone bills, travel and entertainment. Then make a list of all the expenses your parents cover or subsidise, which might include your rent, utility bills and car insurance.

“Add up your total monthly expenses and determine how much additional income you’ll need to bring in to start to cover some or all of these bills.

“Figure out how much extra income you would need to bring in to start taking over those bills. Consider using an app such as Moneydashboard to help you.”

His advice? “Start a conversation with [your parents] about your desire to find financial independence. Consider giving yourself rent and utility obligations.

“Pay your parents monthly for these expenses and have them put that money into a savings account for you to use when you actually do move out. Paying fake bills will help demonstrate to you and your parents that you have the means and maturity to support yourself financially.”

We don’t all have to step back from a life of luxury and privilege to find financial independence. But that doesn’t mean it won’t involve sacrifice.

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