How To Build Wealth At Every Stage of Your Life

Illustration: Ojima Abalaka

To succeed as a Modern Woman and to ‘win’ in all areas of your life, you must be in control of your finances and build wealth. It is therefore important to understand the different stages of life i.e. the financial life cycle and how to build wealth at each stage. I would start from the girl child, in order to ensure that we also empower our children, sisters, students, mentees etc. This is the most important stage because if you get it right at the stage, you are likely to be wealthy.

There are different theories on the number of stages in a financial life cycle, however, for simplicity; I have divided it into 5 phases or stages.

Stage 1: The Modern Girl Child This is typically between ages 0-12. At this stage we begin to understand the value of money i.e. N200 can buy more sweets than N100. We begin to have conversations like:

Kid: “Mum, why can’t we buy a bicycle?

Mum: “Because we do not have enough money at the moment”.

Kid: “But mum what about the money in my piggy bank, I have a lot of money in my piggy bank”.

Mum: “Honey, N500 is not enough to buy a bicycle”.

Generally, we believe that money is to be used to buy junk food and also to buy toys. At this stage we receive pocket money. Financially intelligent parents would begin to teach their children the basics of savings via a piggy bank or a kids’ account. They would also learn the concept of earning money by being paid for household chores as well as through mini businesses such as making and selling lemonade or bracelets etc. My daughters started their first business at age 6 and 3. During their Christmas holiday, they made personalized bracelets from beads and also bracelets with virtues such as love, faith etc. and sold them to their aunties, uncles and friends. Shortly after they received an order to make personalized bracelets for a birthday party. Within two weeks they made about N30,000.

I introduced the concept of a piggy bank and also taught them how to give as well. I also had a very proud moment the other day. My daughter had received some money as a gift from her uncle at Church to buy ice cream.

A blind man came to ask for money and she heard me say I didn’t have any cash left. She then said to me “Mummy he can have this money” and she gave him her ice cream money. At a very young age, I opened investment accounts for my daughters with a monthly direct debit in place. Warren Buffet began investing also at this stage. He has also created an online club for kids called the Secret Millionaires club where they are taught the basics of entrepreneurship and wealth management.

Stage 2: The Modern Teenage Girl This is typically between ages 13-19. At this stage we develop a better understanding of money. We understand that it is not everything you want that you can get. We also start earning money via jobs like baby-sitting, etc. In developed economies, at this stage teenagers work in fast food restaurants or retail clothing stores to earn some money. Some teenagers are also required to work in companies as interns during holidays.

Ty Bello, Nigeria’s renowned photographer started her hair styling business at age 15. One of Africa’s youngest billionaires Ashish Thakker started his first business at age 16. Needs include buying top-up cards for mobile phones, shopping and entertainment etc. When you get to university you begin to understand the importance of managing your finances. In university you are also introduced to the concept of credit cards, over drafts etc. It is important to educate teenagers on the pros and cons of credit cards and overdrafts. A lot of students get it wrong and end up in a lot of debt once they graduate from University and this affects their ability to build wealth in other stages of their life. Key things to consider at this stage include:

1. Learn the value of hard work and earning money through internships, holiday jobs.

2. Start a business using your talents and gifts.

3. Start a savings and investing culture.

4. Be involved in the process of managing bank accounts and investing.

5. Read books on personal finance.

Stage 3: The Young Modern Woman This is known as the accumulation stage and is typically between ages 20-30/35. At this point, a person has just graduated or has started working and has some disposable income. Income is typically larger than expenses at this stage. Some may live with their parents while some may begin to consider getting their own accommodation. This is also a stage when people begin to think about settling down etc. Needs include gadgets like smart phones, cars, appliances like dvd players etc. This is the best time to begin to develop a personal financial system.

The earlier you start the more time you have for your money to grow and enjoy the benefits of compounding. I love Albert Einsteins quote which says “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t pays it”. Basically compounding interest simply means that the money you earn as interest is put back into your account or investment thereby allowing your money to grow faster. An individual at this stage should develop a savings and investment culture, learn and practice the principles of personal finance which is budgeting and also consider setting up an emergency fund.

In terms of investing this is a good time to invest in riskier assets and take advantage of long term growth opportunities. Mrs Ibukun Awosika, started her first business at age 25, today she is the first female chair of one of Africa’s biggest banks.

At this stage, a young woman is also concerned about her appearance and so she is interested in buying items such as bags etc. Bags can be a good investment depending on your purpose for acquiring them. So for instance you should buy a bag of good quality that would last long and preferably a timeless classic like a Louis Vuitton bag as opposed to seasonal or trend based items. You can also consider buying a neutral colour. You can also begin to buy valuable jewelry like gold, which appreciates over time and can be sold when cash strapped. It is very important to withstand peer pressure at this stage.

Focus on your vision and goal. Key things to consider at this stage include:

1. Have a vision board

2. Set financial goals

3. Prepare monthly budgets

4. Establish a savings culture

5. Invest in the stock market

6. Pay off any debts accumulated in University such as student loans, credit card debts etc.

7. Invest in yourself.

8. Start a business

Stage 4: The Modern Woman This is called the Consolidation stage and is typically between ages 30/35-55. At this stage your expenses are rising higher than your income. You may be married or starting a family. You may have moved out of your parents’ home and live on your own. Needs include education for kids, rent, mortgage, planning for retirement, higher education etc.

Financial discipline is required at this stage. It is important to be strict with budgeting and not forfeiting savings and investments. In terms of investment it is also important to begin to diversify your portfolio. This is also a good time to take some risks depending on the side of the spectrum you fall on. Key things to consider at this stage include:

1. Set up an education trust fund

2. Buy land and or get a mortgage

3. Health insurance

4. Life insurance

5. Build up your assets

6. Plan for retirement

7. Create multiple streams of income

8. Invest in yourself It is also important to note that you are never too old to dream.

Mrs Betty Irabor started her magazine at this stage. Mo Abudu started her tv station, Ebony Life TV in her late forties.

Stage 5: The Older Modern Woman This is called the retirement stage and is age 55 and above. At this stage most individuals would be getting ready to retire or be retired. In most cases there is no steady income except from pension allowances. Needs include healthcare, retirement home, and vacation, maintaining a standard of living, estate planning and leaving a legacy.

A woman who was financially intelligent in her younger years will enjoy this stage. She may have set-up a business that is running on its own and therefore be enjoying the fruits of hard work during her youth. This is also a time to ensure you are fulfilling your purpose and at this stage you may even start a new business.

Please note that these age ranges are just a generic template and not cast in stone. Individuals may past through these stages at different ages. Once you have determined the stage you are in your financial life cycle, it is important to set financial goals and to determine action steps required to achieve your goal. An important point is to ensure that you create a plan to achieve this goal and that your plans are as flexible as possible. Example:

Goal: Set-up an emergency fund of 6 months’ worth of living expenses by 30/12/22

Action Steps:

  • Track spending
  • Create a budget
  • Pay-off all outstanding debts ∙
  • Reduce excess spending on eating-out and eat home-cooked food
  • Reduce spending on aso-ebi
  • Set-up direct debit with bank
An article by Omi Oshikoya. Founder, The Richer Woman Inc