Planning for the Future v Instant Gratification
From this April, employers in even the smallest of businesses will have to set up a pension scheme for their employees. It’s a move intended to ensure that we are all planning for our futures by getting people to start investing in their pensions at an earlier age.
There’s nothing wrong with this, of course, but making young people in particular see the value in investing in something that won’t pay out for decades is no easy feat.
Policies such as this would be far more effective if they were supported by relevant education, enabling young people to better understand the importance of pensions and providing them with the skills they need to negotiate the many years of financial matters they will encounter between starting their first job and retiring.
The reality of the modern workplace is that most people will move employers several times during their career. Many will have periods of self-employment – 10% of the workforce is now registered as self-employed – so knowing how to save effectively for a pension is getting more complicated, meaning young people will need to better equipped than ever to deal with such matters confidently.
The long term nature of a pension plan isn’t the only thing that makes it seem like it can be put off until later. When you’re on a low wage, as most young people will be when they start work, faced with rising rents and most likely saddled with debt from your studies, putting money aside for a period of your life decades away can seem like an absurd and impossible task.
Only by educating our young people properly in these matters can they hope to build successful, independent lives for themselves. We need to make pensions relevant to them and they best way to do that is to link the subject into other related topics. We need to teach them to see the connections between employment, pensions, housing, taxation, debt, their aspirations and their existing financial situation.
Experiential Learning Works
The best way to do this is through experiential learning, where they can learn by doing. Put them in situations that highlight the importance of getting a job and building a career and how those things directly affect the life they would like to live. Simply teaching them how to budget better won’t make subjects such as pensions any more relevant or appealing but giving them a clearer view of the world and the skills with which to negotiate it will certainly help.
If we want our young people to be properly prepared for retirement, we need to ensure they have the knowledge and skills to see them through the intervening years.