At 18, I lost half my savings investing in the dotcom bubble.
The frenzy had reached its pinnacle. My money vanished overnight, evaporating like the air from a bubble as the fragile skin is popped.
I had been saving the wages I earned working a summer job selling ice cream at a theme park. Back then, people were making their fortunes speculating on internet companies. Buying any share of a company with a .com was easy money. Or so I was told.
In 1999 the potential of the internet was unbelievable. No one knew exactly what the internet did, nor could they envision companies like Facebook or Youtube. Amazon was there, but so were hundreds of others. Memories of the dotcom boom return when I read about Bitcoin and blockchain technology today.
The shares I bought were in a company called lastminute.com. The irony of the name was lost on me then, along with the craze for Tamagotchi toys, the Y2K bug and the fashion for wearing double denim.
I was going to be rich. What could go wrong?
But something wasn’t going to plan. Turning on the evening news, I saw a sea of red from trading floors across the world beamed into my television set. The words of the reporters' lips popped in my ears. The pain in my gut was unbearable – nobody told me this could happen. Thinking about how many hours I had worked for that money and how many ice creams I had to sell. The agony was too much to stomach.
Promising myself this would not happen again, I decided to learn from this experience. I wanted to find a money coach, someone who had been successful in creating money. Taking the remaining money from my summer job, I made another investment, which turned out to be the greatest of my life at that point. I bought a copy of ‘Rich Dad Poor Dad’ by Robert Kiyosaki for £7.99. This book cost the equivalent of 90 minutes of working that summer job.
The upside of this investment was unlimited, because it changed my money mindset. This book gave me patience, courage and a belief in better. I did what the book advised me to do and wrote down my dream goal. I took a piece of paper and wrote: “I will be a millionaire by age 35.”
All I needed to do was think and I would grow rich, as money was simply manifested into my life. How wrong I was.....
“Today, everyone is an investor”
Today, everyone is an investor. If you have a pound coin in your back pocket, then you are an investor. Choosing not to invest that money will mean inflation begins to erode it. If you started a job after 2018, then you will have been automatically enrolled into a pension and will now be in charge of how that is managed. A change in the law made in 2015 (called pension freedoms) means that you will have to understand and decide how to withdraw the money from your pension when you stop working.
This represents massive change. Looking after your money has moved from a want to a need.
A couple of decades ago, you did not need to know about investing. You could manage perfectly well without paying any attention to the world of financial services and the over-excited reporters on your television as markets collapsed and the world economy melted down, as we saw in 2008.
Pensions were managed by your employer. You worked, and at the end of your career you would get paid an income as a percentage of your salary.
You could buy an affordable house by paying your mortgage every month. At the end of the 25 years, you would own that house outright. You could save everything else in cash and relax, as interest rates were around 5%. The current Bank of England base rate is 0.75%.
Today, everyone is responsible for either keeping an eye on or creating a portfolio of investments that will pay for living costs when they stop working. Investing is no longer just a niche activity or a hobby. Everyone needs to engage with it. Today, investing is a life skill as important as driving or cooking. A failure to get to grips with it will make your life harder, more expensive and mean you have less control over your future.
It is the individual (that means you) that needs to understand money. You make the decisions that will impact every aspect of you and your family’s life. This is great news. Today, you are in charge!
This is an extract from Millennial Money Mindset by Neil Doig, which was shortlisted for the FT and McKinsey Bracken Bower Prize. He is the founder of Money Tipps, and hosts the Millennial Money Mindset podcast.