The seven stages of your financial life

1. Stage 1: Between 13 and 17 – high school age

People in this bracket should already be developing a plan for financial independence. They are preparing for career, evaluating future financial needs and resources and are also eager to explore financial systems such as banks, saccos, microfinance institutions and so forth. This is where they also develop a personal system of record keeping. Accountability typically begins at this stage.

What to do as a parent: Teach them accountability by showing them the need to save their pocket money for big purchases. Show then how to budget too. 

Stage 2: Young adult (age 18 – 24)

What is happening? This is where one is looking for a career. In this bracket, people are also establishing a household and trying to gain financial independence.

What you need to be doing: People good at management here would begin to determine insurance needs, establish credit, save and also create a spending plan. This is the where you need to cultivate the highest discipline on matters of spending and develop a personal financial system of how you manage finances.

Stage 3: An adult with or without children (age 25-34)

What is happening? If you have a family, this is the child-raising stage. Start an education fund for your children as a young parent. At this point, you are also managing an increased need for credit. You will be looking for more loans, working to pay off any debt on investments like student loans and mortgage.

What you need to be doing: You should begin expanding your career goals. Also, you will need to discuss and manage additional insurance needs for planning of your life. Maximise financial management by all members of your household by discussing the importance of sticking to the budgets, getting the maximum returns of whatever you are getting as income because at this level, you should be trying to save as much as you can for retirement.

Tip: Read up on amortisation. This is the process of gradually writing off the initial cost of an asset.

Stage 4: Serious working adult (age 35-44)

What is happening? This is where people mostly upgrade their career training, furthering their education for Masters and PhD programmes. Here, you are also building on your children’s further education needs.

What you need to be doing: The needs are greater, so there is need for a greater income, which translates into a need to diversify. This is where you expand on areas of investment as employment may not be sufficient. This is also where most people begin to feel the need to establish retirement goals, so you should diversify your investments to accommodate that.

Stage 5: Midlife (age 45-54)

What is happening? You will likely be assisting with higher education for your children at this point, both high school and university.

What you need to be doing: You need to invest heavily for a stable life, and keep updating your retirement plan. Here, people also develop estate plans. Also, retirement is around the corner.

Stage 6: Pre-retirement (age 55-64)

What is happening? You may be meeting responsibilities of aging parents, where you might be taking care of them in your own home.

What you need to be doing: At this point you should have enough for your lifestyle – both the basic and the comforts and still have more for unforeseen expenses. This will be the stage of smart asset management.This is where you will be consolidating your assets, planning for future security and re-evaluating property transfer. You will also be creating part-time retirement income or voluntary work. You are also evaluating expenses for retirement and current housing.  

Stage 7: Retirement (65 and above)

What is happening? If you did all you needed to, you should be enjoying a life of comfort.

What you need to be doing: Here, you will be re-evaluating, adjusting your living conditions and spending more on health. You will also be adjusting insurance programs for increasing risk, acquiring assistance in management of personal and financial affairs and finalising estate plans and your will.