Harry Potter at 40: would he be a financial wizard?

Daniel Radcliffe takes the title role as the young wizard in the Harry Potter franchise. Photo / File

COMMENT:

Fans of Harry Potter, immortalised in fiction as the 11-year-old boy wizard, will know he inherited a fortune — but will what's left be enough to sustain him for a lifetime?

Born on July 31, 1980, the hero of JK Rowling's books will turn 40 in 2020 — the same year that the first millennials reach the same milestone.

Often, significant birthdays are a trigger to think about our finances. Harry may have been through a lot more than the average 40-year-old muggle, but his ups and downs are a reminder that life can be unpredictable. Without an inheritance like Harry's to fall back on, 40 is the age at which you often wake up to investing — or at least to prioritising your financial goals.

But how rich is Harry? His parents left him a fortune when they were killed by Voldemort — a vault full of gold galleons, which he discovered aged 11. Some Potter fans have estimated this to be worth a whopping £870,000.

While at school, Harry won 1,000 galleons in the Triwizard Tournament and inherited a significant sum from his godfather, Sirius Black. By the time he graduated from Hogwarts, the website Therichest.com estimated Harry's net worth at 319,995 galleons (about £2m or NZ$3.9m).

Harry went on to become an auror, one of the most prestigious jobs in the wizarding world. And at the time of Harry Potter and the Cursed Child, aged 37, he was head of the department of magical law enforcement at the Ministry of Magic.

His career has gone well, so it stands to reason that Harry at 40 should be set for a comfortable retirement. Unless, that is, he's spent too much.

We know Harry has a natural tendency to splash out — buying the entire contents of the sweet trolley on the Hogwarts Express, and expensive omnioculars for himself, Ron and Hermione at the Quidditch World Cup. He also provided the seed capital for Fred and George Weasley's joke shop.

Sadly, Harry didn't have the chance to learn money skills from his parents. The fact that they put his inheritance in Vault 713 (his birthday in reverse) is not a great first lesson. Although a safe place to store a fortune, cash is not a great investment.

Harry was born into an era of peak inflation, meaning his galleons would have lost much of their purchasing power in the muggle world. Data from the Office for National Statistics show the pound experienced an average inflation rate of 6.49 per cent a year between 1980 and 1991.

But wealth and poverty are both key plot themes for JK Rowling. Harry would have become acutely aware of the Weasleys' difficulties with money. A large family, they are happy despite their money troubles. Their frugality, hand-me-downs and always buying second-hand chime with the Fire movement (Financial Independence, Retire Early) which has become particularly popular among millennials over the past decade.

Nevertheless, by the age of 40, most people haven't given much thought to retirement planning — many have been too busy supporting a growing family and, unlike Harry or Draco Malfoy, won't have inheritances to fall back on.

You may wish that you could use Hermione's time-turner — the time travel device — to roll back the years and take pensions more seriously. But, according to the government's state pension calculator, Harry and his peers will reach state pension age in 2048 aged 68 years. With 28 years to go, there is still time to plan.

The Potter generation should cast these three financial spells over their finances before putting longer-term plans in place.

First, pay off expensive debts. By this I mean non-mortgage debt — the type that you may take out to buy a flying Ford Anglia or a Nimbus 2020.

Second, build a cash buffer of 3-6 months' salary, saved in an easy access account in case of an emergency — and be sure to know the difference between an emergency and an unnecessary purchase, such as an invisibility cloak.

The Lestrange Vault at the Gringotts Wizarding Bank at the Harry Potter Warner Bros Studio Tour attraction in Watford, England. Photo / Getty Images

Third, put the right insurance in place so that if you're seriously injured or die, your financial dependants will have enough to live on in comfort. Harry Potter will be acutely aware of this as his own parents died early and he needs to protect James, Albus and Lily. If you don't have dependants and are more of a Sirius Black, you could skip this step.
The next two steps are harder for most muggles to achieve.

Having a place where you can live mortgage (or rent) free by the time you retire is a goal some millennials may regard as a fantasy. The average age of a first-time buyer is 32; even owning a broom cupboard in Privet Drive is going to cost you. There is no magic wand, but the government offers help in the form of the Lifetime Isa and Help to Buy scheme.

Finally, you need to invest enough money to provide a comfortable income in retirement. If you're starting from scratch age 40, you ideally need to save 20 per cent of your income. If this seems as difficult as learning a patronus charm, try to find a way to end your 40s with this saving percentage.

As a wizard, Harry must not underestimate his life expectancy. Dumbledore lived for 150 years. Their knowledge of magic means their physical health is better than expected — potions such as skelegro can help you grow back your bones within hours. But based on admissions to the wizard's hospital St Mungo's, most of the health issues wizards face are due to magic and not naturally occurring diseases.

You too may have a longer life expectancy than your parents. Interactive Investor's Great British Retirement Survey found that women are more likely to underestimate how long they will live.

If you feel like you need the financial equivalent of the sorting hat to help you fathom all of this out, you may consider the earthly services of a financial adviser or financial planner to be a wise investment.

The first session is usually free of charge, so it makes sense to interview and evaluate at least three professionals to find the one that's right for you. Remember this is the person to whom you will be revealing more than just your money situation, but your future goals and aspirations. If there's even a hint of the dark mark, trust your instincts.

Moira O'Neill is head of personal finance at Interactive Investor, the author of "Finance at 40" and a former winner of the Wincott Personal Finance Journalist of the Year. She writes for the Financial Times.

Written by: Moira O'Neill

© Financial Times 2020