Starting your financial plan: what every young professional needs to know.

Why starting early matters more than most people realise

The phrase "start saving early" is so widely repeated that it has lost much of its force. The numbers behind it have not. Consider two people who both contribute £200 a month into a pension earning 6% average annual growth. One starts at 22, the other at 32. By age 67, the person who started at 22 has a pot of roughly £370,000. The person who started at 32 has around £182,000. Same contributions, same returns, different starting point. The decade's head start produces a fund more than twice the size.

This is compound growth. It is not a trick or a projection designed to flatter. It is simply what happens when investment returns generate further returns over a long enough period. The longer the period, the more powerful the effect - and young professionals have more of it available than any other group.

Your workplace pension: the most important account you probably have not reviewed

Most people in their first job enrol into their employer's workplace pension, select the default option, and never look at it again. That is better than not enrolling at all. It is not as good as it could be.

The first thing to check is your employer match. Most employers will match your contributions up to a certain percentage of your salary. If you are contributing 3% and your employer matches up to 5%, you are leaving 2% of your salary on the table every month. That is free money, and declining it is one of the most straightforward financial mistakes a young professional can make.

The second thing to check is the default fund. Default funds are designed to work adequately for a broad population. They are not designed for your specific age, risk tolerance or timeline. A 22-year-old with 45 years until retirement can typically afford to take considerably more investment risk than a default balanced fund reflects. More risk over a longer period generally translates to higher expected returns, with time as the cushion against volatility. A single conversation with an adviser to review your fund allocation takes very little time and can make a significant difference over a career.

ISA, pension or both - how to think about it

The ISA versus pension question comes up constantly for young professionals. The answer is almost always both, but in the right order.

Start with the pension, specifically, contribute enough to capture your full employer match. That match is an immediate 50-100% return on your contribution depending on the structure, which no ISA can match. Once you have captured the full employer match, building an ISA alongside your pension makes excellent sense.

The ISA has one significant advantage over the pension: flexibility. You can access ISA money at any time without penalty. Pension money is locked away until age 57 (rising to 58 in 2028). For a young professional who might want to use savings for a house deposit, a career change or an emergency in the next decade, having accessible savings alongside the pension is important.

The Lifetime ISA is worth a specific mention. If you are under 40 and have not yet bought your first home, a Lifetime ISA (LISA) allows you to save up to £4,000 per year and receive a 25% government bonus on contributions - up to £1,000 free per year. As a first home savings vehicle it is excellent. The penalty for withdrawing funds for any other purpose before age 60 effectively returns less than you put in, so it works best when used for the purpose it was designed for.

First investments: beyond the savings account

Research consistently shows that young people in the UK are more financially engaged than any previous generation at the same age. Apps like Trading 212, Freetrade and Wealthify have made it genuinely easy to start investing. That engagement is a good thing. The platform is not the plan, however.

A few principles for starting to invest well. Diversification matters more than stock selection: a broad index fund typically outperforms the majority of actively managed funds over long periods, with lower costs. Costs matter: a 1% difference in annual charges compounds into a significant difference in outcomes over 30 or 40 years. And time in the market outperforms timing the market: the research on this is consistent and long-standing.

Social media financial content - finfluencers, TikTok tips, Reddit threads - is not a substitute for regulated advice. Some of it is accurate and useful. A significant proportion of it is unregulated, unqualified and produced to build an audience rather than serve your interests. The legal obligation that a regulated financial adviser carries toward you does not exist for a content creator.

Protection: the conversation most young people skip

Income protection and life cover are consistently the most under-purchased financial products among young professionals. The reasons are understandable: it feels abstract, it costs money now for a benefit you hope never to need, and it does not appear on a net worth dashboard.

The practical reality is this. If you are 24, earn £35,000 a year, and are unable to work due to illness or injury for six months, your statutory sick pay after the first 28 weeks drops to £116.75 a week. If you rent, that does not cover your rent. Income protection insurance pays a proportion of your salary - typically 50-70% - for the period you are unable to work. The premium at 24 is substantially lower than at 34, and lower still than at 44. Health conditions that arise between now and then could make cover more expensive or unavailable altogether. The right time to arrange protection is when you are young and healthy.

How to get started

The financial steps that matter most for young professionals are not complicated. Check your pension enrolment and employer match. Review your default fund. Open an ISA. Consider a Lifetime ISA if you are saving for a first home. Build an emergency fund of three to six months' expenses before putting large sums into illiquid investments. And arrange income protection while premiums are low.

None of these requires a large income or significant existing wealth. They require decisions - and the earlier those decisions are made, the more time compound growth has to work.

Aetas Wealth works with young professionals who want to get these decisions right from the start. A first conversation is free, carries no obligation, and typically takes around 20 minutes. We will tell you honestly where you stand and whether working together makes sense.

This guide is for general information purposes only. It does not constitute regulated financial advice. Tax treatment depends on individual circumstances and may be subject to change. The value of investments can fall as well as rise. Always seek regulated financial advice before making pension, investment or protection decisions.