Natalia de Santiago: “The best thing for the economy is for the pandemic to be controlled”
Explaining to people how to manage their personal finances is key. Making it enjoyable and easy is a challenge, especially when the level of knowledge is very low in almost all countries. The expert in analysis and financial planning, and mother of five daughters, is well aware how important it is to have everything as closely controlled as possible in order to balance the accounts. Her latest book, Invierte en ti (Invest in you) published by Planeta, is a practical guide to financial education, which avoids technical language and unnecessarily complicated words. It highlights the importance of saving for retirement and having a proper budget to organize expenses and know where your money goes.
Her interest in finance came when she got hold of her father’s bank book. Since then, she has not stopped writing. Natalia de Santiago (Madrid, 1977), an industrial engineer, recognizes that 2020 was a year of change, a year in which she did not expect to dedicate so much time to financial disclosure. However, she’s satisfied. Her book is the result of the countless consultations on personal economics and finance that she began to hold after the pandemic started. Many people asked her how to manage their salary, savings and investments, and her aim was to respond in the best way possible—with clarity and humor. A challenge when it comes to numbers and financial products! Today, her greatest challenge is getting everything done and taking advantage of the lack of leisure activities to move projects forward.
“Saving should be automatic and always at the beginning of the month”
What do you think 2020 has taught us about our finances?
It’s better to prevent than to cure, and good times must be taken advantage of in order to prepare for the bad ones.
How do you think we can get the most out of our money?
By spending time on it, like everything. Just as you cannot be an athlete without training, we cannot expect to have a healthier economy without giving it some attention.
Give us five reasons to start saving for the future.
The first piece of advice is that the sooner you start, the less you will have to save. The second is that there will not be enough young people to support so many retirees. The third is the younger you are, the less likely you will be to be able to live off your pension. Fourth, the new forms of working of the gig economy (and the increase in freelancers and the self-employed) have worse public coverage for retirement. Lastly, the more you earn, the more it will cost you to keep your lifestyle in retirement.
“Teaching basic economics in schools would be a great advancement for society”
Should we be concerned about retirement?
The truth is yes. Most of us will have to proactively save for retirement. That’s why it’s important to crunch the numbers, almost from the first salary you earn, and plan your savings in sufficient time, between 30 and 40 years of age at the latest.
What percentage of one’s salary do you recommend saving each month?
I think that a reasonable amount is anything above 10 percent of your net income. This is in good times, because in bad times, like those we are currently living in, this is clearly impossible. My recommendation is to set it up automatically at the beginning of the month. Without even thinking about it, make a transfer to your savings account, so as soon as you receive your salary. Then, manage your day to day with what’s left. The opposite is currently more common: saving if there’s something left over at the end of the month, and that doesn’t work. I think buying a house, for example, is a good way to save, especially for retirement.
You say that financial institutions often speak a different language and are not very transparent. What should they improve to help people make better decisions?
Indeed, I believe that there is a lack of transparency, a lack of willingness to be understood and, moreover, an abuse of confusing technical terms. Traditionally, the banker was a person you could trust and their word was the law, even if the client didn’t get the drift at all. Today, that trust must be earned. The obligation to explain products and services in a simple way so that clients can understand them clearly rests with the bank or the insurance company, not the consumer.
“Financial institutions have an obligation to make themselves understood by the consumer. A product that’s not understood should not be invested in or taken out”
You have always worked in finance, in Paris, Madrid and Munich, and in 2009 you co-founded MyValue Solutions, a company specialized in the design of “open banking solutions” for financial planning and management for banks, companies and individuals. What are these types of services?
We design software so that banks and other financial institutions can offer more quality services and information to their clients, such as categorizing transactions so that clients don’t have to budget manually, adding information from other banks so they can have all their financial information in one place or managing pre-scoring services, which is basically what the banking sector uses to approve or deny loans.
How would you define a pension plan, in a few words? Why is it important to have one?
I would define it as a collective investment vehicle to save for retirement, which is clearly important. Unfortunately, changes in the taxation of these products and the complexity of the offering don’t help. There’s a long way to go in this area.
You talk about four types of insurance we should all ask for as a gift. What are they and why do you think they matter?
I think we are doing ourselves wrong by not wanting to think about certain situations in which we may find ourselves in the future, such as an incapacity to work or situations involving varying degrees of dependence. No one wants to think that the odds are against them, but the reality is that we all place bets in this game. If your chips are down, having good coverage can spare you great discomfort and suffering. And of course, consider your loved ones and what situation they would be in if you didn’t have life and burial insurance.
“Most of us will have to proactively save for retirement”
What would you say to those who are considering buying a home at this time? Do you think this is a good time? What should we all know about our mortgage?
I think now is no better or worse than any other time to buy a home. The important thing is to remember that if you take that step, it’s because you can afford it, and not to mortgage beyond your possibilities. As for the mortgage, I think many of us are not aware of what you can save in interest if you pay it off in advance, especially at the beginning of the loan, reducing the term rather than the monthly payment.
On occasions, you have pointed out that one way of increasing the birth rate, the economically active population and tax contributions in one fell swoop is by simply encouraging work-life balance. Do you think there’s still much to be done in this regard? What barriers do you think are the most common?
There’s not just much to be done, but a great, great deal. And I would tell you that the most difficult barrier to tear down and to which we all contribute in one way or another is the disregard for work done at home and for the family. Until this work has the social and fiscal recognition it deserves, women—and mothers in particular—will always be at a disadvantage.
What advice would you give women to become increasingly free and independent?
You can’t be fully independent if you don’t take control of your finances, and this is about getting educated and spending a little time and attention on it. There’s no other way.
“You can’t be fully independent if you don’t control your finances”
How can someone with the salary of a mere mortal start off when they decide they want to invest? What should they do if, for example, they want to start with a modest amount like 1,000 euros?
It’s not so much about if you have 1,000 euros to invest, but rather if you’re willing to spend the time and mental space needed to become properly informed. Most people fail on this very basic point. A product that’s not understood should not be invested in or taken out. In this regard, I recommend starting with very little money. A good example is an index fund, which has fewer associated expenses and does not require excessive financial knowledge to understand and follow.
In recent months, you have written a lot about economics in times of crisis. What do we need to know about coronavirus to understand how it will affect the economy?
The fundamental thing is to know that this is not a competition of economy vs. health. No economy is possible with collapsed hospitals and the levels of uncertainty we’re currently living in. The best thing for the economy is for the pandemic to be controlled. Let’s not fool ourselves.
Do you think we should teach basic economics from a young age? Would we be better at managing our finances?
The short answer is yes, and the long answer is absolutely. If this were taught in schools and tested in university entrance exams, it would be a great advancement for society. Unfortunately, most citizens would have to retake the course (she smiles). It’s not me saying this. The OECD pointed it out after its global survey, where it concluded that no country earns a passing grade in terms of basic knowledge.
In a nutshell
A book to understand the economy well: I haven’t yet found the perfect book, but Basic Economics by Thomas Sowell comes close.
A wish: That we are all vaccinated soon.
A piece of advice that you’ll never forget: It’s much harder to earn one more dollar than it is to spend one dollar less.
Women: We have made progress, but there is still much to be done.
Young people: The ones who have suffered most from the last two crises.
Song: It’s business time, by Flight of the Conchords. It’s perfect for brightening up your day, without fail.
Work: May it be in abundance.
Fine print: I hope it will soon be at risk of extinction.