Meet the teenage investors of the future

Is it possible to become a millionaire at 30? Could learning about investing help build your financial resilience, and how might consumers be affected by a cashless society?

These questions were among those asked by more than 300 hopeful students who entered the FT’s competition to find Britain’s top young personal finance writers.

Organized with the London Institute of Banking and Finance (LIBF), the pandemic has proven to be a catalyst for young investors with time and money. The foreclosure produced a bumper crop of entries, and many expressed a clear desire to learn more about personal finance topics at school.

“The standard was incredibly high, so judging was difficult, but very rewarding,” said Catherine Winter, general manager of financial capacity at LIBF who judged the applications with Bobby Seagull, the FT columnist and math expert on television. “It’s wonderful to know that so many young people are passionate about finance.

Our three winners, whose edited entries appear below, must now decide how to invest their £ 150 prize.

---

age group 18-19 years

Winner: Pamela Kruze, Pendleton Sixth Form College, Salford

Want to be a millionaire at 30? What role does investing and stock trading play in helping people build wealth for their future?

Is it really possible to become a millionaire at 30? American trader Tim Grittani was able to do so at the age of 24 by trading in penny stocks. These are stocks priced under £ 1 in the UK or $ 5 in the US. In five years, YouTuber Tim claims to have reached more than $ 4 million in profit. So can we do it too?

As always, it depends. Investing allows people to build wealth, but there is no guarantee of becoming a millionaire. You have to be careful because everything can be lost.

Can you spot the trends early? For short-term traders like Grittani, when to buy and when to sell is everything. If you had been in the mass action to briefly squeeze GameStop, then get off the ship before the price dropped, you might have made a good comeback – but not millions. However, many believe GameStop is overpriced and the bubble may burst soon.

Actions like Netflix performed well during the pandemic as people were stuck at home subscribing to shows and binging. This has happened in the past, but investors are still trying to profit from predicting the future.

To spread your risk, consider a longer-term investment aimed at steady but steady growth. It’s less risky, but your assets need longer to appreciate in value, so the chances of becoming a millionaire by the age of 30 are pretty slim. There is an advantage; choose well and you can reinvest dividend payments to increase the value of your investments while you wait.

Before investing, you should consider your options and weigh the risks and rewards of a particular investment strategy before deciding whether or not to implement it. The higher the risk, the higher the return could be, but so too is the risk of losing your money.

You should also factor in brokerage fees and commissions, but cheaper alternatives are available like Freetrade, Robinhood, and Webull, so access to stocks and stocks is now much easier for young investors. .

Overall, investing allows you to build your wealth over a period of time and there are many options available depending on your financial situation and the level of risk you are willing to take. If you are aware of all of these factors, you could be creating wealth for your future. Maybe over time you too could become a millionaire.

---

Age group 16-17

Winner: Eliza Stevenson-Hamilton, Benenden School, Cranbrook

In times of uncertainty, many people worry about their finances. What do we mean by financial resilience? Why is this so important and how can young people improve their resilience for the future?

As a young person preparing to step out into the real world, the concept of managing your own finances seems daunting. While living with the coronavirus, we have learned the effects of a recession not only from our textbooks, but also from watching our parents and siblings worry about losing their jobs or being able to pay rent.

The term financial resilience is one that I have encountered before, with teachers or parents stressing the importance of having money to fall back on and overcome unforeseen circumstances. Despite this, I have yet to meet an adult who has explained to me how I should go about becoming financially resilient.

Why is it so difficult for young people to develop these skills?

High unemployment rates coupled with low average savings have forced many people to return to their parents. This seemingly short-term arrangement can have long-term consequences. According to a 2019 Urban Institute research report, those who lived with their parents between the ages of 25 and 35 were significantly less likely to own a home 10 years later.

I would say that a contributing factor is that by staying with their parents, young people retain their “financial virginity”. They lack essential first-hand skills such as managing household bills, food budgets and paying rent.

This could represent an opportunity to save for the future. Yet, reading stories about soaring house prices and huge student debt, I can understand why the propensity to consume is so high among those under 30.

In these uncertain times, what is the best way to encourage students and young people to come out into the world without having to fall back on their parents? In my opinion, the secret lies in the investment.

By building long-term investments, young people can take control of their finances. That’s why I think we need more education on investing in young people.

It can be easy to ignore this, saying that young people don’t want to learn how to invest their money, or wouldn’t be able to compete with more experienced investors.

This is simply not true. I conducted a survey of students aged 11 to 17 at my school and found that 91 percent of those surveyed said they plan to invest their money in the future, and 88 percent said they plan to invest their money in the future. 100 said they would like to learn how. This willingness to invest is also seen in the real world.

Take the story of GameStop. We see that young people are looking for opportunities to invest and will seize all the opportunities they can find. We’re not lazy or demotivated, we just haven’t learned to invest.

Investment also needs young people. Our risk-loving nature allows us to make decisions that more risk-averse investors might not make. In addition, we have time on our side. By starting to invest young, people have the opportunity to make mistakes early on, which allows them to develop the resilience necessary to be successful in investing, as well as the time to let compound interest generate returns.

So how can young people improve their financial resilience? As you might expect, my answer is education. It seems crazy that we expect us to step out into the world and be financially resilient, without being told how. By introducing investing in young people, teachers could pave the way for their students to become both financially independent and equipped with the resources to overcome the unexpected problems we are sure to face in our future.

---

Age group 14-15

Winner: Mukund Mahendra Soni, Queen Elizabeth’s School, Barnet

Money is king? Not so much these days. What are the potential advantages of a cashless society and what could be the disadvantages?

The invention of money around 640 BC is widely regarded as an economic breakthrough. In recent decades, however, we have moved away from cash, favoring contactless cards, online transactions, or mobile payments. It could spark another economic revolution, but there is resistance – and with good reason.

The pandemic has accelerated the decline in liquidity. Consumers in the digital age prefer the ease and speed of cashless payments. Some estimates suggest that by 2027, cash will account for less than 10% of all transactions in the UK.

Cash is inefficient for banks due to the high cost of the required infrastructure, such as ATMs, vans carrying banknotes, and branches and counters accepting banknotes and coins.

The government also stands to gain from digitizing payments. In rich countries, the cost of minting, storing, sorting and distributing cash is estimated at 0.5% of GDP. The lack of cash would hamper the underground economy, allowing the government to more closely monitor tax evasion and evasion.

However, there are still concerns. Over a million people in the UK do not have a bank account, making it difficult for them to pay cashless. The effortless nature of cashless transactions can make it harder for consumers to realize how much they are spending.

A cashless society could also negatively affect small businesses. All businesses must pay interchange fees to credit card issuers that operate electronic payment systems. These costs are often disproportionate for small businesses which tend to process more low value transactions.

For consumers, the loss of anonymity in cash transactions could allow governments or banks with business objectives to mine personal data and spy on shopping patterns.

Another major downside is that electronic payment systems are vulnerable to technical failures and cyber attacks, and many rural areas still have poor digital connectivity.

The biggest limitation of no cash, however, can be demonstrated in the following scenario.

Imagine that you are in a foreign country, no one knows you and you want to take a taxi back to your hotel. You count for payment on your phone, but it has run out of battery. How do you get home now?

Click on here to learn more about the FT’s financial literacy and inclusion campaign, or send an email finance.literacy@ft.com