#1 - Why You Need Financial Education

Firstly, thank you for tuning in and welcome to Episode #1 of The Making Money Simple Podcast!

This podcast will provide bitesize 20 minutes episodes on all things money and financial education.

Over the coming weeks and months you can expect episodes:

- ISAs

- Pensions

- Credit Cards

- Saving

- Budgeting

- Investing

- Property

To name a few of the key topics this podcast will focus on.

#1 - Why You Need Financial Education

What Is Financial Education?

Financial education is the ability to make financially sound decisions.

Or put more bluntly - the art of not making dumb decisions with your money.

Why Is Financial Education Important?

I think for 3 main reasons:

- School doesn’t teach us

- Parents doesn’t teach us

- Society doesn’t teach us

School is too busy teaching us that the mitochondria are the powerhouse of the cell (or something like that).

Parents often pass on more investing advice, normally either being ‘don’t invest’ or ‘investing is risky’.

In society, money is a taboo subject and people don’t often enjoy discussing money opening.

These 3 reasons mean that we don’t learn and absorb financial education over time, so we need to self educate on the topic.

Common Mistakes That People Make

The three first mistakes that came to my mind were:

- Not investing

- Credit card debt

- Thinking investing is risky (cash is actually what is risky)

Not investing, whether through an ISA or pension, is criminal (slight exaggeration).

By investing you are essentially buying back your future time and freedom. People often put off investing, but this is the exact opposite of what we should do. By investing early and often we are able to benefit from compound interest over the long term.

Credit card debt, specifically high-interest consumer credit card, is completely unavoidable and has some nasty consequences. However, so many people, particularly younger people who are not responsible with the ‘free’ credit card money, abuse credit cards and then find themselves in thousands of pounds of debt.

The way around this is credit education. Even if you are not a fan or do not use credit cards (personally, I’m a big fan of credit cards), it’s important to understand how they work, as well as their benefits and costs.

Investing is not risky; it’s the complete opposite. What is risky is keeping your money in cash.

Once you have built an emergency fund, assuming you don’t need the money for any other reason in the short term, keeping your money in cash is guaranteeing you a loss of 2-3% per year because of inflation.

To illustrate this, at an inflation rate of 2%, £1,000 today is worth £819 in 10 years, £670 in 20 years, and £549 in 30 years.

Isn’t guaranteeing yourself a loss of 2% a year more risky than getting a return of 7% over the long term in the stock market?

That wraps up the first ever episode of The Making Money Simple Podcast. Thanks again for tuning in/listening. If you have any feedback, criticisms, requests or questions please get in touch (Instagram @makingmoneysimple).