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Plan for the future

Top Financial Planning Tips for Millennials

September 22, 2023

In an era defined by rapid technological advancement and economic shifts, millennials find themselves navigating a financial landscape that markedly differs from that of previous generations. Born between the early 1980s and the mid-1990s, this dynamic demographic is faced with a set of challenges that set them apart from their predecessors. Research indicates that Irish millennials may face a potentially less favourable financial future compared to the generation that came before them. Studies suggest that factors such as increased housing costs and shifting job markets are impacting their ability to accumulate wealth. At FitzGerald Flynn Insurances, we recognize these distinctive circumstances and are committed to providing tailored financial solutions to help Irish millennials forge a prosperous path forward.

Understanding the Millennial Financial Paradigm

Unlike earlier generations, Irish millennials are encountering a host of economic challenges that necessitate innovative financial planning strategies. Recent surveys indicate that housing costs have surged, with many millennials facing the daunting prospect of affording their own homes. This, coupled with a highly competitive rental market, has made it increasingly difficult for young individuals and families to establish a secure financial foothold.

Moreover, the evolving job market presents both opportunities and uncertainties for millennials. With automation and globalisation reshaping industries, adaptability and skill diversification have become crucial for career success. This generation must also contend with the prospect of reduced pension benefits and a later retirement age, underscoring the importance of proactive retirement planning. It's worth noting that some studies suggest that Irish millennials may face a less optimistic financial outlook compared to previous generations, potentially experiencing lower real incomes over their lifetime. These factors collectively highlight the need for comprehensive and forward-thinking financial guidance tailored to the unique circumstances of Irish millennials.

Start with a Solid Foundation: Pensions

Millennials often view financial planning through the lens of short-term financial goals - how much will I have saved in 12 months’ time? How much of a mortgage deposit will I need in 24 months’ time? While planning for and achieving these short-term financial goals is undoubtedly important, people often overlook the importance of long-term financial planning. The cornerstone of any long-term, comprehensive financial plan is a well-structured pension. In Ireland, there are several types of pensions to consider:

1. Occupational Pensions: Defined Benefit and Defined Contribution

Occupational pensions are typically provided by employers. They can be categorised into Defined Benefit and Defined Contribution plans. Defined Benefit plans promise a specific benefit at retirement based on factors like salary and years of service. Defined Contribution plans, on the other hand, are based on contributions made and investment performance, with the final pension pot depending on these factors.

2. Personal Pensions

Personal pensions are privately held retirement accounts that individuals contribute to themselves. Typically, the individual would have earnings from a self-employed trade or profession or would have earnings from non-pensionable employment. They offer more flexibility and control over investment choices.

3. PRSA (Personal Retirement Savings Account)

A PRSA is a pension plan designed for self-employed individuals and employees not covered by an occupational pension scheme. Recent changes in PRSA legislation make PRSA’s a viable alternative for company owners. It provides a flexible way to save for retirement.

4. State Pension

The State Pension is a government-provided pension scheme available to those who qualify based on several factors concerning their PRSI contributions over the course of their working life.

The Power of Starting Early

Starting a pension early is one of the most impactful financial decisions you can make. Let's illustrate this with an example:

Assuming a 30-year-old individual contributes €300 per month into an occupational defined contribution pension plan with an average annual return of 6% until the Irish retirement age of 66:

● Total Contributions over 36 Years (from age 30 to 66): €129,600 (€300 x 12 months x 36 years).

● Value of the Pension Pot at Age 66 is approx. (€ 428,000)

On the other hand, if the same individual waits until age 40 to start contributing, they would have only 26 years of contributions:

● Total Contributions over 26 Years (from age 40 to 66): €93,600 (€300 x 12 months x 26 years).

● Value of the Pension Pot at Age 66 is approx. (€213,000)

This example highlights the significant advantage of starting early. By contributing the same amount monthly, the individual who started at age 30 has a substantially larger pension pot at retirement compared to the one who delayed contributions until age 40.

Starting early allows your contributions to benefit from compounding over a more extended period, which can lead to exponential growth in your pension fund.

At FitzGerald Flynn Insurances, we understand the intricacies of pension planning. Our experts work closely with you to ensure your pension is tailored to your needs and financial situation.

Protect What Matters: Life Insurance

As millennials transition into the phase of starting families, ensuring financial security for loved ones becomes paramount. This is where life insurance plays a pivotal role. It provides a safety net, offering peace of mind that your family's financial well-being will be protected in the event of the unexpected.

Why Life Insurance is Crucial for Young Families

Starting a family often brings increased financial responsibilities. Mortgages, childcare, education, and daily expenses can add up quickly. Life insurance acts as a financial safety net, ensuring that your family's needs and aspirations are safeguarded even if you're not there to provide for them.

Types of Life Insurance

Term Life Insurance: This is a straightforward form of life insurance that provides coverage for a specific term, typically ranging from 10 to 30 years. It pays out a lump sum if the policyholder passes away during the term. It's a cost-effective option, making it an attractive choice for young families.

Whole Life Insurance: Unlike term insurance, whole life insurance provides lifelong coverage. It can also include a cash value component that grows over time, serving as a savings element in addition to the death benefit.

Decreasing Term Life Assurance (Mortgage Protection Life Insurance): Decreasing Life Assurance, also known as Mortgage Protection, is tailored to address the specific needs of homeowners with a mortgage. As the name suggests, the payout amount decreases over time, typically in line with the outstanding balance on your mortgage. This ensures that your loved ones can continue to meet mortgage obligations even if you're no longer there to contribute.

If you were to pass away when your children are still young, the life insurance payout required to ensure your loved one’s financial safety is at its highest. This is why Decreasing Life Assurance is often a great option for people with young families. As your family grows older and their dependency upon you lessens. By the end of the term, the policy will have provided essential protection during the most financially vulnerable period of you and your young family’s life.

At FitzGerald Flynn Insurances, we understand the unique financial considerations of young families. Our experts are dedicated to helping you choose the right life insurance plan to secure your family's future. Whether it's term life insurance, whole life insurance, or mortgage protection, we provide personalised guidance to ensure you have the coverage you need. Why not try out our new online life insurance calculators now to get an instant life insurance, mortgage protection and illness cover quote?

Savings and Investments: Building Your Wealth

Creating a robust financial foundation requires a strategic approach to savings and investments. At FitzGerald Flynn Insurances, we understand the importance of tailoring a plan that aligns with your goals and risk tolerance. Here, we'll delve into key strategies for building and growing your wealth.

Setting Realistic Financial Goals

A crucial first step in wealth-building is defining clear and achievable financial goals. Whether you're saving for a down payment on a home, starting a business, or planning for retirement, having specific objectives in mind provides direction and motivation. Our team works closely with you to establish realistic milestones, ensuring your financial plan is both purposeful and attainable.

Diversification and Risk Management

Diversifying your investment portfolio is a fundamental strategy to manage risk and optimise returns. This involves spreading your investments across a range of asset classes such as stocks, bonds, real estate, and alternative investments. By doing so, you can reduce the impact of market volatility on your overall portfolio.

Our experts at FitzGerald Flynn Insurances leverage their extensive knowledge of the Irish financial landscape to help you construct a diversified portfolio that aligns with your risk tolerance and long-term objectives. This balanced approach aims to provide stable growth while safeguarding against potential downturns.

The Power of Compounding

Time is a powerful ally in wealth-building. The concept of compounding allows your investments to grow not only on the principal amount but also on the accumulated returns. This exponential growth can significantly amplify the value of your investments over the long term.

Regular Reviews and Adjustments

As your life evolves, so should your financial plan. Regularly reviewing and adjusting your investment strategy is essential to ensure it remains aligned with your changing circumstances and goals. Our team at FitzGerald Flynn Insurances is dedicated to providing ongoing support, offering guidance on adjustments that may be necessary to keep your plan on track.

Tax-Efficient Investing

Maximising tax efficiency is a critical aspect of wealth-building. By leveraging tax-advantaged accounts and investment strategies, you can optimise your after-tax returns. Our experts are well-versed in the various tax-efficient investment options available in Ireland, and we're committed to helping you make informed decisions that minimise tax liabilities.

Balancing Short-Term and Long-Term Objectives

Finding the right balance between short-term financial needs and long-term wealth-building goals is essential. Our personalised approach considers your current financial situation while also prioritising your future financial security. We'll work with you to strike the right balance between immediate financial requirements and long-term investment strategies.

The FitzGerald Flynn Insurances Difference

We don't just offer financial services; we build long-term relationships. Our dedicated team aims to become your trusted advisers for all your future financial needs. We're here to provide ongoing support and adapt your plan as your circumstances change.

Ready to take control of your financial future? Reach out to us today. Whether you're interested in pensions, life insurance, or exploring investment opportunities, our experts are here to help. Contact us now to schedule a consultation.

Remember, the journey to financial security begins with a single step. Let FitzGerald Flynn Insurances be your partner on this exciting path to a brighter future.

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