Q1: What age do you need to start thinking about your financial future?
Any age is the right age, there are always things in life, no matter what age you are, that you need to plan for financially. Whether it be saving for a deposit on a house, planning a family or coming to the end of your mortgage or working life and looking toward retirement.
Q2: What are the key things we need to consider?
Firstly, everyone should start with a dream! Figure out what they want in life: list them, cost them and plan how to achieve them. Then they must always start by paying off debt first, that is imperative. And thirdly, pay themselves first. Decide how much you need for your savings goals, pay yourself that amount first and then spend what's left.
Q3: That all sounds a bit boring, where's the fun?
The fun comes back to reconnecting with your dreams, rewarding yourself by achieving those dreams. Going on the sports team trip that you saved for, buying those new things you wanted, having that holiday etc. Don't use your budget to tell you what you can't have or do, your budget should be all about what you can have and do. It's not a "don't spend plan", it's a "spending plan". It's about taking control of your income and making decisions up front about where it goes.
Q4: What are the investment opportunities that people have to ensure they achieve their dreams?
If you are young, simply start with some savings. People always say they can't afford things they want or want to do; the reality is that they haven't planned to have the money.
For shorter term needs, say under 4/5 yrs, then savings in savings accounts and term deposits is ideal, because in New Zealand we have the luxury of high interest savings accounts and term deposits offering very good returns. This type of saving also gives you the security of knowing your money is safe and allows you to calculate almost exactly what returns you'll get.
If you don't need the money for a number of years, then investing is the way to go.
Q5: Investment funds are one popular investment option. Can people invest directly into these or do they have to go through a broker/middleman?
You can do either, obviously it would be better to buy direct and cut out the middleman. However, you do need to understand a bit about investing in funds to do it yourself. While young, it is worthwhile investing in growth funds, because time is on your side and you can wait for the funds to grow. You simply need to know which funds are which. Older people may want a bit more security and not risk their money, so they might go for a more balanced fund...
Q6: Are there any tricks to saving that fit any particular stage of life?
Regardless of your age, everyone should get an understanding of the way money compounds over time. This is simply about leaving the interest gained on your saving to accumulate over time. Don't withdraw the interest, add it back to the capital and reinvest it. That way, you don't have to wait until you have a large sum before you start saving. An example - start with $2000, add $100 per week, and after ten years, with an interest rate of 7.35%, you'll have grossed over $75,000!
Many share schemes and investment funds offer a reinvestment option.
Look out for Joan's new book Live the Dream, how to become rich and free through your business. RaboPlus will be introducing savings accounts for businesses in November.