Full Disclosure
June 20, 2008
Youth culture and financial security

Many of our youth are growing up in a culture dominated by ideas and values of instant gratification, credit cards and “I need it now”. It is, therefore, no surprise that a large percentage of our young adults today are not preparing satisfactorily for their financial futures. {{more}} How many of our youth between the ages of 27-34 are working on a specific plan for retirement at a specific age?

It is usually the thinking that retirement is a long way off. But the truth is, if we do not start saving now, we may not be able to retire at all. The earlier people begin investing, the greater the likelihood that they will accumulate wealth. Why? The answer is simple, it takes significantly less money to accomplish what you want when you have more time working for you.

Retirement is not the only significant issue that today’s young adults are failing to consider. How many of our young working adults have an emergency fund to cover at least three-months of living expenses should they face a financial crisis? For our own financial security, young adults need to have the mindset that we must do it for ourselves now. How then can we raise the financial awareness of our children?

An excellent system has been implemented in some of our primary schools based on a co-operative saving structure. This is an exceptional means of ensuring that our youth are nurtured in an environment where they understand and appreciate the need to save.

The following six tips have been gathered from numerous sources and personal experience and are designed to help young adults analyse their current financial situation, pay off debt and save for the future.

1.Start now: Do not procrastinate when it comes to saving for retirement, it is important that you begin now.

2.Get rid of debt: Today’s buy now, pay later mentality has forced many young Vincentians into debt. It is, therefore, advised that you must analyse your current debt situation and create a plan that pays off the debt quickly. By paying off debt, you will have more money to save for the future.

3.Make a plan and stick to it: After analysing your current financial situation, determine a financial plan that suits you. Once your plan is set, stick to it. Consistency is the key. Be sure your plan includes measures to eliminate debt and save for the long and short-term, and a careful plan to invest.

4.Say no to unnecessary credit cards: While credit cards can be a useful financial tool when used properly, the key is paying them off every month and avoiding interest payments. Say no to credit card spending when you do not have the money to zero-out the balance each month.

5.Talk with your parents: Ask your parents and find out what has worked for them and what has not. Learning from their mistakes can help prevent you from making your own, and learning from their successes can help point you in the right direction financially.

6.Educate yourself on financial planning: There are many great resources available, including magazines, books, financial planners and local banks. Surround yourself with as much knowledge as possible so you can make an educated financial plan that will carry you well into the future.

Saving for global uncertainties.

In 1798, Thomas Malthus predicted that population growth would be perennially held in “check” by inherent limits to food production. However, the demand for food has risen faster than supply, causing food prices to climb faster than the rate of inflation. The World Bank noted that since the year 2000, food prices have risen 75%, a figure which conceals even more dramatic increases, such as a 200% increase in the price of wheat and a 250% increase in the price of rice.

The world is officially in the throes of a food crisis. Commentators, economists, even President George Bush, have weighed in with their opinions on the causes of the drastic increase in prices. Among the most common explanations are a shifting of arable land to the production of biofuels, a weak United States dollar, rising demand from an emerging middle class in Asia, and droughts in Australia and the Ukraine. There are many short-term responses which represent mere acts of desperation intended to temporarily alleviate some of the food shortages, and only hint at some of the medium-term and long-term implications. Our national food plan is well set to bring great returns and with the assistance of our farmers, consumers, the Ministry of Agriculture and other stakeholders our venture would be one that is sustainable.

Statistics quoted in the The Economist reveal that fuels will take a third of America’s maize harvest. The price of corn has already risen to a record high of six dollars a bushel, and will certainly climb higher if biofuels become a more entrenched component of United States energy policy. Already, the United States Congress has legislated that automobile fuel contain a certain percentage of biofuel. Producers of ethanol, the most common biofuel in the US, are scurrying about trying to secure enough corn for their dozens of new distilleries. A three billion dollar ethanol pipeline, the first of its kind, is already in the works, and a powerful new lobbying network has emerged to protect the interests of this growing industry. The fact of the matter remains that our local markets will be forced to respond to such global changes.

Nobody can predict whether high food prices are here to stay. While bad weather does not represent a structural issue, a shortage of arable land and increased demand from developing countries are unlikely to abate. Increased efficiency and a removal of barriers to trade could ease some of the pressure, but the world should nonetheless prepare for a future where prices are high. Our youth must, therefore, save and invest wisely.