Meet the teen investors of the future

Is it possible to become a millionaire by the time you are 30? Could learning about investment help to boost your financial resilience, and how might consumers be affected by a cashless society?

These questions were among those pondered by more than 300 student hopefuls who entered the FT’s competition to find the best young personal finance writers in Britain.

Organised with the London Institute of Banking and Finance (LIBF), the pandemic has proved to be a catalyst for young investors with time and money on their hands. Lockdown 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 tough, but very rewarding,” says Catherine Winter, managing director of financial capability at the LIBF who judged the entries with Bobby Seagull, the FT columnist and TV maths expert. “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 money.

18-19 age group 

Winner: Pamela Kruze, Pendleton Sixth Form College, Salford

Want to be a millionaire by the time you’re 30? What role does investing and trading in stocks and shares play in helping people build wealth for their future?

Is it really possible to become a millionaire by the age of 30? US trader Tim Grittani was able to do it by the age of 24 by trading in penny stocks. These are shares priced below £1 in the UK, or $5 in the US. In five years, YouTuber Tim claims to have traded his way to over $4m in profits. So can we do this too?

As always, it depends. Investing allows people to build wealth, but there’s no guarantee of becoming a millionaire. You have to be cautious as everything can be lost.

Can you spot trends at the start? For short-term traders like Grittani, timing when to buy and sell is everything. If you had joined in the mass action to short squeeze GameStop and then jumped ship before the price fell then you could have made a good return — but not millions. However, many think GameStop is overvalued, and the bubble may burst soon.

Stocks such as Netflix performed well during the pandemic as people were stuck at home subscribing and binging shows. That’s what happened in the past — but investors are always trying to profit from predicting the future.

To spread your risks, consider a longer-term investment targeting steady but consistent growth. This is less risky, but your assets need more time to grow in value, so the chances of becoming a millionaire by the age of 30 are quite slim. There is an upside; choose well and you can reinvest the dividend payments to boost the value of your investments while you wait.

Before investing you need to consider your options and weigh the risks and benefits of a particular investment strategy before deciding whether to go through with it or not. The higher the risk, the greater the return could be — but so is the risk of losing your money.

You also need to consider stockbroker costs and commissions, however cheaper alternatives are available like Freetrade, Robinhood and Webull, so access to stocks and shares is now much easier for young investors.

Overall, investing allows you to build up your wealth over a period of time and many options are available depending on your financial position and level of risk you are prepared to take. If you are aware of all of these factors, then you could build wealth for your future. Maybe, in time, you too could become a millionaire.

16-17 age group 

Winner: Eliza Stevenson-Hamilton, Benenden School, Cranbrook

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

As a young person preparing to go out into the real world, the concept of managing my own finances seems daunting. Living through the coronavirus, we have learnt the effects of a recession not only in our textbooks, but also through watching our parents and siblings worry about losing their jobs or being able to pay the rent.

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

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

High rates of unemployment paired with low average savings have forced many to move back with their parents. This seemingly short-term arrangement can have long-term consequences. According to a research report in 2019 by the Urban Institute, those who lived with their parents between the ages of 25-35 were significantly less likely to be homeowners 10 years later.

I would argue that a contributing factor is that by staying with their parents, young people maintain their “financial virginity”. They miss out on learning first-hand important life skills such as managing household bills, food budgets and paying rent.

This could present an opportunity to save for the future. Yet reading stories about skyrocketing house prices and enormous student debt, I can see why the propensity to consume is so high in the under-30s.

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

Through building long-term investments, young people can take hold of their finances. This is why I think we need more education about investment aimed at young people.

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

This is simply untrue. I conducted a survey of students aged 11-17 at my school and found that 91 per cent of respondents said that they planned on investing their money in the future, and 88 per cent said that they would like to learn how. This eagerness to invest can be seen in the real world too.

Take the GameStop story. We can see that young people are looking for opportunities to invest and will seize any chances they can find. We are not lazy or unmotivated, we just have not been taught how to invest.

Investment also needs young people. Our risk-loving nature allows us to make decisions that more risk-averse investors may not take. Further to this, we have time on our side. By starting to invest young, people have the opportunity to make mistakes early on, allowing a development of the resilience necessary to succeed at investment, as well as the time to let compound interest build returns.

So, how can young people improve their financial resilience? Predictably, my answer is education. It seems crazy that we are expected to go out into the world and show financial resilience, without being told how. By introducing investment to 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.

14-15 age group 

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

Cash is king? Not so much these days. What are the potential benefits of a cashless society and what might be the downsides?

The invention of currency around 640BC is commonly regarded as an economic breakthrough. Over the past few decades, however, we have inched away from cash, favouring contactless cards, online transactions or mobile payments. This could trigger another economic revolution, but there is resistance — and with good reason.

The pandemic has sped up the decline of cash. 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 per cent of all transactions in the UK.

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

The government also stands to gain by digitalising payments. In rich countries, the cost of minting, storing, sorting and distributing cash is estimated at 0.5 per cent of GDP. Going cashless would hamper the shadow economy, enabling the government to keep closer tabs on tax evasion and fraud.

However, there remain concerns. More than 1m people in the UK don’t have a bank account, making it impossible for them to pay using cashless methods. The effortless nature of cashless transactions can make it harder for consumers to realise 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 payments systems. These costs are often disproportionately expensive for smaller firms that tend to process more low-value transactions.

For consumers, losing the anonymity of cash transactions could enable governments or banks with commercial objectives to exploit personal data and spy on shopping habits.

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

The greatest limitation of going cashless, however, can be demonstrated in the following scenario.

Imagine you’re in a foreign country — no one knows you, and you want to take a taxi back to your hotel. You’re relying for payment on your phone, but it runs out of battery. How do you get home now?

Click here to find out more about the FT’s Financial Literacy and Inclusion Campaign, or email financial.literacy@ft.com