With countless teenagers across the country having their own jobs and starting to consider what life looks like after school, it only stands to reason that there is a growing engagement from young adults to invest their money and expand their knowledge of finances.
The 2022/23 Young Persons’ Money Index survey found that 82% of young people want to learn about money and finances at school, rising to 85% among 17-18 years olds. This proves that there is a high demand from teenagers for schools to be teaching them in depth about various aspects of financing, including mortgages, pensions, debt management and tax.
The ever-increasing number of young people becoming interested in these matters could be attributed to social media as people from all walks of life can tell their stories- some of which demonstrate entrepreneurship and the world of finances. However, this uptake of interest in money by teenagers could also be linked to the cost of living crisis, in which 70% of young people reported feeling anxious about money. Ultimately, this anxiety could be attributed to a lack of understanding about money and therefore must be addressed by the education system to properly inform students on how to manage money as they get older, because research shows this is not currently up to scratch.
So what do young people want to invest in, and why? For most young people, investing is all about growing their wealth, which is why many would rather invest than use a savings account. This could be for a variety of reasons, whether that is to fund university, travel abroad, or in the longer term to afford a house or start a pension. Although, as you must be 18 to begin investing many young people have to wait until they are of age which can be frustrating. Due to this, Junior ISAs (individual savings account) are even more useful as parents can invest on behalf of their child. This is the same as a normal ISA with all the regular tax advantages, but only at 18 can it be accessed yet still provides no capital gains tax once the money is withdrawn. For these reasons, it is highly recommended that every parent should at least consider setting up a Junior ISA for their children.
Beyond the age of 18, the decisions of many young investors are heavily impacted by the opinions of financial influencers- underlining the new-found significance of social media in the world of investing and finance. A 2022 survey also found that 82% of UK investors aged between 18-34 are willing to sacrifice returns in order to have fully ethical investments. This is a stark contrast to only 36% of investors over 55 sharing these beliefs, establishing that this new wave of young investors is motivated by more than just money; but take into account the effects of their actions on others.
On top of this, studies show that age also has an impact on the risk of investment a person is willing to take, with younger people willing to take much greater risks with their portfolio. This occurs because young people have a much greater opportunity to recover these losses through income, subsequently explaining why older investors tend to be more apprehensive with their money. The expectations of young investors are generally much higher as well, with many stating they look for returns of at least 10%, possibly because of naivety and lack of patience. In addition, many young people invest out of competitiveness with friends or family- which can be a very strong motivating factor as success can be viewed as beating others as well as growing your own personal wealth. High-risk young investors also have an affinity to investing in technology and internet-related stocks, perhaps due to younger generations’ reliance on technology besides the growing importance of technologies such as artificial intelligence will have on the future. Underlining the forward-thinking nature of young people in terms of their portfolio along with future aspirations and desires.
Finally, many teenagers and young investors may not consider building a retirement fund at such a young age and think “I’ve got ages”- they would be wrong. As a result of compound interest, it is always best to start developing a pension as early as possible and build it to as high a total as you are able to based on your income. Therefore, it would be a very good idea for young people to apply their foresight not only to their investments and portfolio but also to their pension to allow for a comfortable and enjoyable retirement.
In conclusion, the motivation behind many young investors can vary greatly from the excitement of building a portfolio to simple friendly competition. Regardless of what these motivating factors are, there is an increasing demand from young people to be informed on financing in schools and begin investing their own money at a rate never seen before.