Young People Need to Grow Both Their Financial and Human Capital
By James Parkyn
Many of our clients ask us to help get their children started on building wealth using our time-tested, evidence-based approach to investing.
They know when it comes to saving and investing, the earlier you get started the better. In fact, many have told me they regret not starting much younger themselves. These parents see investing as an essential life skill and want their kids to get going as early as possible.
That’s why I wrote our new eBook, Investing Life Skills for Early Savers. I wanted to present key concepts in an easy-to-read format that’s accessible and relevant for young people. Judging by the positive response we’ve received so far, this guide has hit the sweet spot with readers.
It covers seven essential investing skills over just 28 pages. You won’t be surprised to learn the first of these is titled Getting Started. In investing, as in so many things in life, more than half the battle is taking the first step. Indeed, I’ve often thought the famous Nike slogan should have been: Just Start It.
The psychological barriers aren’t easy to overcome. But, by beginning now, you get into the habit of saving, give your money more time to compound and build your confidence to deal with market fluctuations and make smart money decisions.
Other topics covered in the eBook include the importance of cultivating an investor mindset, understanding human biases, diversifying to reduce risk and controlling your emotions.
Another skill that’s discussed is managing your human capital. It gets very little attention in the media but is of critical importance, especially for young people.
Human capital is your potential to generate income over your lifetime. It can be defined as the present value of all future income from working and, for most people, it’s their most valuable asset. For young people, it comes to a huge number and is even more valuable because it’s hedged against inflation – wages tend to rise over time.
You can increase your human capital through education, training and cultivating interpersonal skills. You also need to protect it. You do so with such tools as disability insurance, which is less popular than life insurance, but statistically much more likely to be needed.
If you’re like most people, you’ll be rich in human capital when you start your working life, but poor in financial capital. As you move through your career, your goal should be to convert your human capital into financial capital by earning, saving and making good investment decisions.
I encourage you to download your free copy of Investing Life Skills for Young Savers, regardless of your age. If you have any questions or comments about it, please let me know. And don’t hesitate to contact us if we can help with your family’s financial needs.
For more insights and information on investing and personal financing topics, listen to our Capital Topics podcast on our website or wherever you get your podcasts.