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How understanding your finances can change your life

Adapted Transcript from Alexa von Tobel TEXxTalk, ‘One life-changing class you never took’

Jessica is your typical student. She just graduated this year with 40 000£ of student debt and 4000£ in credit card debt. Jessica is lucky, and lands a job right out of college, making 35 000£ /year. So every month she takes home 2300£. Jessica isn’t going to have a budget, she considers that she earns so little that she doesn’t need one. She moves to the city, and gets an apartment for 1200£ a month. Most graduates are in debt, so she only repays her minimum payment in her credit card, and even misses a few of those as she doesn’t really understand what a credit score is. She doesn’t think about emergency savings, as she can barely pay her credit card bill.

She didn’t negotiate her salary, and she is just waiting for her job to give her a raise. 3 years later, she is still on the same salary. She also doesn’t think about retirement, as that’s 43 years away- why the hell would she think about that now! So she doesn’t take advantage of her employer's pension scheme match.

Fast forward, 15 years later: Jessica has followed the same route. She has 2 children and is now closer to 20000£ in debt as, as her life grew, she relied often on credit card debt. She still has around 10 000£ in student card debt, so a decision that she made 2 decades ago is still haunting her every single month. Her credit score has gotten worse as she had amassed more debt. On a good note she has started thinking about retirement, but only has 10 000£ in her pension. She doesn’t have an account set up for her kids.

This has a domino effect on future generations. Her kids will also not get taught about their finances, and will make the same mistakes as her.

What if we could rewind?

If we could teach her before she makes mistakes, how to budget. Teach her that debt is not an answer and how to pay it down. Help her understand that emergency savings accounts are so critical. That she can and needs to negotiate their salary along the way. What would happen then?

So I want to go back to the educated Jessica. Let’s say we did actually teach her all of these empowered facts. Years later she’d be in a position where she could open the coffee shop she’d always dreamed of. Her and her husband now own a home because they knew about their credit score.

They’re also looking forward to their retirement. Because they took advantage of all those things in their 20’s and compounding interest worked its magic. Probably best yet, her children have college plans. They’re going off to college and they’re going to be in a significantly better place than Jessica was decades ago. This is the empowered Jessica!

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