The stage of life you are in will greatly affect you choosing the most appropriate investment for your needs. In many ways, matching the investment with your current life situation is the most important factor in deciding how you should invest.

When we are young, starting out in the workforce and yet to accumulate responsibilities, any investment that commits us to regular savings is not only going to get us on the front foot, but likely to form good, lifelong habits. At this stage of life, we encourage clients to pick one medium goal and one long-term goal and commit funds to achieve them. The medium-term goal is usually something like a car or an overseas holiday. We then have the client set up a separate account and consistently save into this account. For most clients, being rewarded by that goal establishes a lifelong habit of saving for things that are important to them.

Putting a few dollars into super or saving for a house deposit is usually not motivating for us when we first enter the workforce, but while we have no financial commitments it is a great time to get ahead. These savings are normally invested conservatively, perhaps in a diversified managed fund, as we don’t want to see balances go backwards while savings habits are being formed. At Future Financial Services, we actually do a free plan for clients leaving school or Uni and entering the workforce for the first time.

As we start to get commitments, a partner, rent or a mortgage and kids, our needs change completely. At this time, we are about to go into a phase where our expenses and income are likely to change. As clients contemplate starting families and so forth, we encourage them to take a short-term focus on investing. Despite the tax benefits of superannuation, we normally avoid additional contributions, as our need for funds are far more immediate than retirement. Investments that require long-term commitments such as investment properties are normally delayed at this point as we are not sure if we’ll continue to have the surplus cash flow to meet sustained ongoing commitments. I would normally encourage things like reducing debt or building a cash safety net.

Once we have stopped having kids and our situation is steady, we can look at long-term options. It is a perfect time to look at investment properties, geared investments, growth based savings plans and additional super contributions. This can be a time to really focus on wealth accumulation with long-term investment horizons during which your situation is unlikely to change.

As we approach and enter retirement, our focus will again shift. We should be looking to move into liquid income producing investments. Superannuation becomes more attractive as the tax benefits are present and the drawback of preservation is no longer an issue. Illiquid assets such as investment properties that have been terrific at building wealth may no longer be appropriate to fund retirement and should be reviewed.

Matching investments to life stage is likely to give a good result in appropriately using your assets and income to provide you with the lifestyle you would like through your entire life.