How younger workers can bounce back after severe Covid-19 job losses
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The Covid-19 pandemic has been especially hard on younger people, with Liberty's 2020 claim statistics revealing that job losses for 18 to 24-year olds were more than double those experienced by middle-aged adults.
Not surprisingly there has also been a major impact on their mental health.
This Youth Month, it is a hope that young people try to reclaim their financial health and freedom, by taking steps to increase their financial acumen.
“Even basic financial knowledge can help young people optimise income, help manage their money better, prioritise saving and enable their plans for the future,” says Fifi Mompati, Liberty Head of Brokers and Alternative Distribution.
Mompati shares the following tips for young professionals looking to start their financial journey.
Even with limited earnings, you can still save
It might sound easier said than done, but the secret to saving is based on the principle of spending less than you earn. Starting a saving habit from your first earning opportunity can be the start of a healthy financial planning journey.
If you can start budgeting each month – and stick to that budget – you’ll be surprised how much you can put away towards your financial goals.
“As a young professional or entry level earner, learning to manage your cash flow, either by reducing or controlling expenses, is all about discipline. This means simply that it’s important that all of us learn where we’re overspending, or where we could be earning more,” says Mompati.
Even if it means cutting down on luxuries, it’s important to start contributing to shorter-term savings goals, like topping up a savings account each month – though ideally you want to get to a place where you’re investing your savings to ensure it grows.
Start an emergency fund to safeguard against financial shocks
Once you realise exactly how much you’re spending each month, you can start thinking about how to protect yourself in case of a financial emergency. Many experts suggest that a person should try and have the equivalent of at least three months of take-home salary saved, in case of retrenchment, job uncertainty or personal emergencies.
Emergency funds or saved up cash can also be placed in an easily accessible investment account for it to grow. At the same time these accounts make it possible to access funds when needed to support you, and your family’s immediate needs, in instances when life’s unpredictable nature makes its presence felt.
“It’s never too soon to consider the investment tools available to you, especially if you have family to support, it safeguards your financial stability when you need to support financial needs and larger payments. These surprises are often what set young people back and lead them to resort to lending, which comes with a host of other challenges,” says Mompati.
Get an insurance policy while you’re still young and healthy
Life insurance might seem like a “nice-to-have”, but it is an essential part of keeping financial anxiety away – especially if you have someone in your life relying on you. There are many reasons to consider investing in life cover, particularly if you’re someone’s else’s support structure. Whether you’re looking after your parents, your own children or your spouse, ideally you would want to be able to continue looking after them even in the event of your death.
But why start young? “The younger and healthier you are, the more affordable life insurance premiums are (and will stay that way). You’re also far less likely to be turned down for medical reasons or conditions that may emerge later in your adult life,” says Mompati.
You don’t have to plan alone, speak to a trusted Financial Adviser
Financial Advisers (FAs) are trained to help people tap into their financial potential. Whether it’s to find the best way to save and invest or to prepare in the short, mid and long-term. So for a young professional starting out, an FA can help find the right investments to grow savings, help you choose the best cover to meet your unique needs and build your dream life.
“Your 20s and 30s should be an exciting time of learning and building a career and family, so it’s vital to ask for help when you need it. Planning is just the beginning, but it doesn’t have to be intimidating,” she says.
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