The Importance of Educating the Next Generation

Written by Edward Fricker

“I wish I knew this when I was younger….”. Believe it or not, this is one of the resounding comments we receive from clients. At MASECO, this is music to our years, because we are always wanting to educate the next generation on the importance and power of investing and financial planning. And it is never too soon to start…!!

There are various reasons for this.

The first being the responsibility and privilege that comes with money as, if you do not understand it, and suddenly come into substantial wealth through inheritance, it can be a daunting prospect, and emotional decisions can lead to wealth and legacy destruction.

The second is that time is your friend when investing, the sooner you understand that, and start, the more powerful compounding you will benefit from. To consider a very simple example, if someone at the age of 40 started to really think about retirement planning and invested £10,000 into a pension, assuming a 5% annualized investment return, that £10,000 would be worth c. £26,533 at retirement age 60. However, if a 21-year-old put £10,000 into a pension during their first year of work (thanks for the help Mum and Dad..!!), with the same investment, returns then it would be worth c. £67,048 which is nearly 3x for the same amount initially invested. The power of compounding should not be ignored, and (sorry to be cheesy) but we should listen to Albert Einstein who said “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t……pays it.”

Finally, with MASECO’s specialty of looking after clients with a US connection, it is important to be well educated on what is tax-efficient from a US and UK perspective at the start, so you will not be caught out by any potential tax penalties. The biggest “mistake” we see is the use of Stocks & Shares Individual Savings Accounts (ISA) which tends to be inefficient for a US person, given it is not deemed a tax-wrapper by the US and therefore taxable, which potentially exposes you to punitive taxation (subject to what you are invested in). Therefore, by learning this early, you can likely increase your net of tax returns.

It can also be forgotten at a younger age, as it might not seem important, but understanding the power of a financial plan is hugely insightful and can really highlight the importance of making smart (but sometimes simple) financial decisions.

At MASECO we are hugely passionate about educating the next generation. It is important for the reasons above and it is also important for client’s knowing that their children are working with a trusted professional and that they will make smart financial decisions for their future.

The Legal Stuff

This document may not be forwarded, copied or distributed without our prior written consent.  This document has been prepared by MASECO LLP for information purposes only and does not constitute investment, tax or any other type of advice and should not be construed as such.  The information contained herein is subject to copyright with all rights reserved.

The views expressed herein do not necessarily reflect the views of MASECO as a whole or any part thereof.  All investments involve risk and may lose value.  The value of your investment can go down depending upon market conditions and you may not get back the original amount invested.  Your capital is always at risk. The levels and bases of, and reliefs from, taxation is subject to change. MASECO is not a tax specialist and we recommend that anyone considering investing seeks their own tax advice. The tax treatment depends on the individual circumstances of each individual and may be subject to change in the future.

MASECO LLP (trading as MASECO Private Wealth and MASECO Institutional) is established as a limited liability partnership under the laws of England and Wales (Companies House No. OC337650) and has its registered office at The Kodak Building, 11 Keeley Street, London, WC2B 4BA.  For your protection and for training purposes, calls are usually recorded.

MASECO LLP is authorised and regulated by the Financial Conduct Authority for the conduct of investment business in the UK and is registered with the US Securities and Exchange Commission as a Registered Investment Advisor.