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There’s only ONE right answer

The age old debate:

Should you save aggressively within your 20’s or should you spend like there’s no tomorrow and save nothing!

Shall we start with the answer:

BOTH ARE STUPID

More than happy for most of you to finish reading there, but if my answer intruiges, interests, or angers you, continue reading…

As with all debates, let’s start off with the argument for each

SAVE SAVE SAVE

Firstly that title should say INVEST INVEST INVEST, because saving is great, but the whole idea would be to invest whilst your in your 20’s to maximise the longe term benefits of riding out any shit storm the stock market might throw at you, and generally to maximise returns.

You see, the younger you are, the more powerful your money is.

And to prove it, here’s what £1 has the potential to become when invested:

^{*Assuming the average stock market return of 10% per year}

As you can see, every decade you add exponentially increases the power of what your money can become.

Let’s magnify this point with another table.

Here’s what happens if you stick away £350 per month (10% of the average UK salary), over different time periods:

^{*Assuming the average stock market return of 10% per year}

In other words, you can set yourself decades ahead by aggresively investing money whilst your young

Over to the other team now.

Live like there’s no tomorrow

There’s a few arguments here, but let’s start with this one, you will never get a period like your 20’s ever again.

You’re young, healthy, and generally have almost ZERO resposibilities. No kids, no mortgage, no ageing parents, nothing! You can nip of to South America for 6 months if you feel like it, buy that convertible because no one else needs that money and get the boujie gym membership because you’re pretty much gonna live there anyway.

Here’s another thought, you don’t earn enough to save anyway. Forget the average salary of £35,000, you’re barely getting over £20,000. And after all of your expenses your left with what, a few hundred quid a month. You may as well spend that on enjoying your life and creating memories than dribbling a few quid a month into a stocks and shares ISA.

The Verdict

You’re both being idiots.

Here’s the answer:

The numbers don’t lie, investing for your future from the age of 20 will set you decades ahead with your personal finances, even if it is just a tiny amount. In addition, that little amount you’re forcing yourself to tuck away each month will create lifelong habits that will transform your relationship with money. If you can do it in your 20’s, you WILL be able to do it in your 30’s, 40’s and beyond.

BUT… (yes there’s a but)

Saving every penny for most is unsustainable, it allows little room for joy. Why does future you get to have all the fun but current you doesn’t get to have any fun at all. Your 20’s are an important decade, not to buy flashy cars, but to create memories, bonds and experiences that will last a lifetime. You won’t be able to drop everything to travel around mexico for a month when you have 2 kids, 3 dogs and a mortgage.

So here’s the classic personal finance answer:

FIND THE BALANCE

Spend money on the things and experiences that are important to you, but create a saving habit regardless of how little it is. That is how you are going to live a joyful financial life!

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^{DISCLAIMER: None of the above is financial advice. This newsletter is strictly education and should not be taken as investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and always do your own research.}