Article by Sarah Dowzell, co-founder and COO of Natural HR
If the current financial landscape has taught us anything, it’s the importance of being able to differentiate between what constitutes a ‘want’ vs. a ‘need’ in terms of spending – however, that makes the assumption that people have a basic understanding of the principles of budgeting, borrowing, and investing.
Sarah Dowzell, COO and co-founder of Natural HR, believes financial education is vitally important early on in life. Here she reflects on how a Certificate in Financial Studies in 2005 helped to shape the path she took when it came to boosting her own banking brainpower.
I think it’s easy for people in business to take for granted that others understand finance. After all, we all need money to survive – but our dependence on it is often misunderstood.
In truth, you don’t need a degree in economics to be financially aware – it’s essentially money coming in, and money going out. But, where things can get confusing, and people find themselves struggling, is around lending, mortgages, why you need a good credit score, and how interest works.
That’s why, when it comes to financial savviness, I firmly believe such skills should be taught at a very young age – if not in school – and not just in terms of how to cope with the arrival of a chunk of student loan, or you first wage, but the importance of taking a longer-term view, as early as you can.
Financial planning matters
There’s no denying that planning for your first house, starting a family, or even retirement is unlikely to be at the top of every 18-year-old’s to-do list, particularly when they are starting to see some disposable income for the first time.
While it’s easy, with the power of hindsight, to make the case that it should be a priority, there’s an argument to say those with experience are the ones who should take the time to help people during their formative years.
I’m lucky that I’ve always had a sensible financial brain and look upon my personal finances in the same way I do for business.
Growing up, I found such grounding immensely helpful when it came to money and understanding of how long-term borrowing would affect me – from the student loan I needed to get me through university, to the credit cards and extra lending ‘opportunities’ that were thrown at me as soon as I turned 18.
It was around this time that I started trading on the stock market, and soon discovered that NatWest would let me set up a stockbroker account with a £10,000 limit – with very little hassle.
The ironic thing is, because I was a student at the time, I used to get a copy of The Times at a much-reduced cost. I’d read the paper religiously and use the intel to help me decide where to invest the money I had – and soon I was making a profit of anywhere between £20-80 on each trade.
Looking back, I can see how it quickly gave me a taste for business, growth, and investment. I’d sit there, in my student halls, working out the potential return on investment while my flatmates were busy partying!
Learn to adapt your plans accordingly
Of course, another big thing to remember when it comes to financial forecasting is the need to review and adjust your plans accordingly. That’s not to say every 21-year-old needs to go and hire a financial advisor, but we should teach others – from a young age – that certain milestone moments call for different financial attitudes and approaches.
I’m a firm believer that people should be taken on that journey, and arguably walked through it even before they get there – so they know what moments to look out for. Such an approach will help them to understand where they are in life, right now, the stages they can expect to go through as they get older, and how financial wants and needs might change as a result.
Right now, it’s important that we all stop and consider the cost of living and how that affects the way we spend our income. Think of it as a business plan, but for life. It can sound quite scary, but it’s simply what’s coming in vs. what’s going out.
No matter your age or income, if you bring home X and your rent, food, and bills amount to Y, it leaves you Z to spend each month. Let’s not forget though, the importance of trying to save some of the ‘Z’ for a rainy day.
One thing I remember being taught at a young age was to set up a standing order to syphon off savings on payday! Now, some of the great FinTech apps that exist are brilliant for allowing you to track and categorise your spending. And, once you reflect on where your money goes each month – rather than. it simply being another transaction leaving your account – you’ll see where savings can be made, particularly around the amount spent on things like subscriptions and snacks.
I learnt a lot of this in 2005 when I took a Certificate in Financial Studies with the London Institute of Banking and Finance. Over the course of a year, I gained a real appreciation for monetary importance by understanding what money is as well as attitudes towards it, and how these might affect life choices – at varying ages and in different situations.
We recently held some payroll training for our ‘non-payroll’ team at Natural HR, to help them understand what our software needs to do, to fulfil payroll requirements. This was focused not on our system, but on areas such as what a tax code is, what a payslip looks like, and the various things needed for someone to receive their wage each month.
A lot of colleagues left that session saying: “I can’t believe you don’t learn that in school.” Which, when you think about it, is surprising. You look at what is paid into your bank each month and don’t consider all the deductions – and what they’re for – beyond perhaps feeling frustrated. Likewise, employers probably don’t consider that staff aren’t aware of that, too.
So, while it’s easy to assume people ‘learn on the job’ when it comes to financial know-how, it’s worth considering putting on some ‘back to basics’ training across all forms of banking – personal and professional – in order to empower your colleagues.
About the author
As co-founder and COO of Natural HR, my day-to-day role sees me overseeing operations within our 50-person business, as well as juggling my other full-time job as a wife and mum!
I first became an employer in the commercial cleaning industry at the age of 21, which ended up laying the foundations for what became Natural HR — more on that later. I hold a first-class honours degree in business studies and associate CIPD membership and am incredibly passionate about HR and entrepreneurship.