‘This isn’t a choice. This is literally what we need to do to be ourselves.’

‘This isn’t a choice. This is literally what we need to do to be ourselves.’

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Money is a major part of human life. We literally need it to survive, from paying bills to buying food, not to mention simple pleasures like holidays.

Yet basic financial understanding is something a lot of people struggle with. A 2024 study by Freetrade, which quizzed 2,000 people, found 81% weren’t confident in their financial literacy and 91% lacked confidence specifically around investing.

Meanwhile the gender investment gap is growing, particually among Gen Z and millennials. The latest data suggests 41% of men aged 18-34 invest, compared to just 20% of women.

Investing can increase individual net worth – it gives your money the chance to grow, and if done successfully, can generate passive income. Ladies, we’re missing out on money!

So, Metro spoke to Nisha Prakash, lecturer in Financial Management at the University of East London, to get some beginner insight. Specifically, simple hacks you need to master before taking the leap.

Define the ‘why’ by setting clear financial goals

First things first, Prakash says that before you start investing, you need to have a general idea of why you’re doing it with clear financial goals.

This could include buying an asset, for example a house or car, paying for wedding expenses, funding children’s education, or, if you’re thinking more long-term, retiring.

‘This will set the timeline and target, which could help you choose the financial instruments based on the required risk-return,’ explains Prakash.

Investing – in it’s most basic form – means buying something in the hope it will increase in value. So once you know what you’re aiming for, you can start looking at options such as ISAs, or stocks and shares, with more clarity.

Understand your risk tolerance

On that note, don’t dive headfirst into something you know little about, nor can afford. Prakash asks: ‘How much volatility can you handle?’ Meaning, can you afford to put all your eggs in one basket? Or, are you better off playing the long game? Aka, taking baby steps with your cash to lower the risk.

Prakash notes that many don’t realise that investing is a spectrum, and there a various ways you can grow your money. It’s not just like what you see in the movies: men in suits shouting and screaming at stock market monitors. If you want it to be, investing can be stress-free.

The expert says: ‘There are many online questionnaires available to measure risk tolerance. Just because stocks give you a high return, it might not be ideal for everyone.’

For some of us, Prakash states that fixed-rate ISAs work the best. These are low-risk savings accounts where you agree to lock your money away for a certain period. In exchange, you’re guaranteed a tax-free interest rate. There are different lengths of fixed rates, typically ranging from one to five years.

However, they often come with a clause: you cannot withdraw money or close the account during the fixed rate period without a penalty. But, because you’re agreeing to leave your money for a set amount of time, you’re usually rewarded with a higher interest rate.

If you know you’ll need to dip in and out of your savings pot during the fixed time, you’re better off looking into an easy access ISA.

Fixed-rate ISAs are commonly suited to people who have lump sums they want to invest and know they won’t need to access them, which leads us to our next point.

Build an emergency fund

This is so important, Prakash emphasises. While some experts say you need at least three months’ worth of living expenses, Prakash says it’s better to be on the safe side and go for six months.

An emergency liquid fund is simple, she says. It protects you from having to sell assets if unexpected expenses arise. Or, if you lose your job or income.

Ultimately, having a financial buffer takes the pressure off, as it means you don’t have to dip into your savings you’ve worked so hard to invest.

Educate yourself on the basics of investing

Prakash says it’s vital people learn about the basics of investing. This includes financial instruments, risk vs. return, diversification, interest rates, and insurance, to name a few.

The expert explains: ‘Complicated products don’t necessarily translate to better returns in the long term. The trick is to understand the business well before investing.’

As Warren Buffett popularly said, ‘Never invest in a business you cannot understand.’

There are so many resources online to give you a better insight into investing. Platforms like Money Saving Expert have various beginner’s guides, from educating on stocks and shares, pensions and investing, and investment funds.

Create a budget

‘Having a budget and tracking your cash flow allows you to understand how much you can realistically invest each month,’ says Prakash.

While Prakash says there are apps that can help track budget and expenses, the 50/30/20 rule is also a great tried-and-tested method. This hack can help build your emergency fund, too.

Essentially, the rule involves dividing your spending into three categories: needs, wants and savings. Then, with each paycheck, allocate 50% to needs, 30% for wants and 20% for savings or debt repayments.

Knowing this exact amount each month allows you to invest that 20% without fear of not being able to afford it.

Check your credit report

Prakash recommends checking your credit report to ‘understand the factors impacting your credit score,’ if there are any. Should you have any errors on your report, for example, it shows an already closed loan, get it corrected.

There are plenty of easy ways to check your credit report online. Experian allows you to check as many times as you want for free, without it affecting your score.

Not only does this give you peace of mind, in terms of knowing whether or not lenders may reject you, but as you improve your score, you’ll have access to better deals, including getting credit at lower rates.

Consider consulting a certified financial planner (CFP)

There’s no shame in needing a bit of hand-holding at the start, says Prakash. If you’d rather have a little guidance before investing and making financial decisions in general, consulting a certified financial planner might be the way forward.

‘They’ll help you build a personalised plan’ in terms of investing, and be able to explain any queries or worries you may have.

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