The (financial) ages of man

EFPA Spain prepares a guide with the financial terms and concepts that must be known and handled at each stage of life

Jorge Murcia

According to the Bank of Spain, financial education “goes beyond the mere availability of information” on the subject. It also consists of having knowledge, behaviors and attitudes to make correct decisions regarding finances throughout life, having healthy financial habits, and knowing the opportunities and risks of the products we contract (accounts, cards, credits, mortgages, etc.).

The Family Savings Observatory also warns that the lack of knowledge about finances “increases the risk of exclusion and, therefore, of inequality.” A recent ING survey revealed that, for example, 62% of Spaniards admit to encountering “certain difficulties” in understanding the documentation related to contracting a mortgage loan.

On the occasion of World Savings Day celebrated on October 31, EFPA Spain -association of financial advisers- has prepared a guide that analyzes which financial terms and concepts should be known and handled at each stage of our life.

At age 5: learning the value of money

It may seem too early a stage to introduce children to this field of knowledge, but according to EFPA Spain, “it is important that they know, from a very young age, what is the value of all the goods they acquire and learn to value the effort involved get them ». The ideal, they consider, is to give them a small weekly or monthly payment so that they know how to manage the money in their piggy bank and realize that it is not limited. Games, such as ‘Learn to count money’, ‘How much does it cost?’ or ‘Finnelis’, constitute one of the best tools for the little ones to begin to understand the value of money.

At age 9: learn to save

It is a good age, according to the EFPA Spain guide, to convey to children the importance of “drawing up a savings and investment strategy.” For example, starting to manage their available money based on their particular interests and needs, “either for the purchase of a toy or for an activity that they like” and are able to save an amount on a regular basis. In addition, it is advisable to encourage saving effort “with some reward” and promote solidarity. “For example, donating part of their savings to a cause that concerns them.”

At age 14: learn to use a debit or prepaid card

Adolescents “have to understand that if they want to buy brand name shoes or a video game, their value is above being a basic necessity.” Therefore, they must learn to save a part of their pay to use for that purchase. In Spain, most banking entities offer specific products focused on minors, debit or prepaid cards that can be contracted from the age of 14. These cards allow you to set a maximum figure so that the kids cannot get a higher amount than the established one.

With 18 years: familiarize yourself with savings and infersion products

When they come of age, they acquire a series of responsibilities and rights “that force young people to worry about understanding new concepts related to managing their finances on a day-to-day basis.” For example, the differences between all investment and savings products. And even learn to make simple budgets “in which your recurring income or your parents’ allowance are balanced, with your fixed expenses and leisure proposals.”

At 25 years: make the income statement

The beginning of the labor stage entails obtaining the first income and the obligation to file the Income Statement from an income threshold. Although the most advisable thing is to have the help of a professional financial advisor, «it is important to familiarize yourself with the income statement, the different tax figures, the tax relief options or the personal situations that influence the final calculation: changes in domicile, marital status, birth of children, etc. ». Details that are important to know when the declaration is mandatory or worthwhile, or whether to do it together or separately, etc.

At 30: how a mortgage and other types of loans work

In Spain, the age group in which the most mortgage loans are requested for a first home is between 31 and 40 years old. That is why when you turn thirty it is convenient to at least be interested in knowing what a mortgage consists of and what are the terms with which you must become familiar before hiring one. For example, the APR, the Euribor, the variable or fixed rate, etc. EFPA Spain recommends “having all the information available and professional financial advice to make the best decision, according to parameters related to the risk profile, the time horizon or personal interests”.

At 35: Saving to Supplement Retirement

The current circumstances surrounding the Social Security system “suggest that it will be necessary to save” to supplement the pension and maintain purchasing power after the active working life is over. For this reason, it is advisable to find out about the alternatives that exist in the market to channel that savings for retirement with which to accumulate “sufficient final capital to constitute an income that complements the public pension.”

One of the most positive aspects about pension plans and other similar savings products is, according to EFPA Spain, “that they can be contracted from very low and periodic minimum contributions. Compound interest will allow us to accumulate increasing amounts of savings over the years.

At 40: Time for Comprehensive Financial Planning

Now is the time to look at “what are our vital long-term financial goals.” To carry out this exercise in economic planning “the most appropriate thing will be to have a qualified financial advisor to guide us”, since with quarantine an important vital moment is reached, “where children begin to grow, professional responsibilities are high and maybe it’s time to take care of older people. ”