I am well aware that the vast majority of 18-25 years olds are unlikely to have much spare cash lying around, and that with limited funds they would have to be rather disillusioned with mainstream savings products to consider branching out into the world of investment, alternative finance-based or otherwise. But equally, there absolutely will be some adventurous young sorts who start searching for a little extra bang to their fairly limited bucks. So, onto the options. In equity crowdfunding there is some scope to involve young investors due to the extremely low minimum investment amounts. To acquire a slice of a growing business through the Crowdcube platform for example, you only need to put up £10. But startup investing is intrinsically risky and equity investments offer no guarantee of return on an investment, or even of the recovery of principle. Investors have to be prepared for the worst to happen. FCA regulations state that retail investors may pump no less than 10% of their investible assets into equity crowdfunding. If you’re tempted to have a punt, I’d suggest that the limit under-25s should impose upon themselves should be even lower – with an uppermost cap of 5%. And then we come to peer-to-peer (P2P) lending. On the investor side, this sector represents the most enticing opportunity for young people. The key distinction is that allocating your money to a peer-to-peer lending platform is not the same as putting your money into a deposit account with a bank. You are not FSCS protected and there is a risk that you could lose all of your money. But, of course conversely, there are gains to be made. For example, Tom Reeve, 23, has a significant amount of money invested with the lending platform RateSetter. Tom inherited some money and was turned off by the interest rates offered by banks. After trawling a number of money saving forums, he found RateSetter, and tested the water by investing £100. Having since invested a great deal more through the platform, Tom pointed to the ease of RateSetter’s auto-invest tool. His maximum exposure to any individual loan is just £10. Tom likes the idea that he’s lending directly to other people, but for him the social element is just an added perk. The major UK platforms generally boast a decent track record in terms of default rates. As far as I’m aware, none of the P2P Finance Association (P2PFA) member platforms have higher than a 3% default rate. A number of platforms – like RateSetter, Zopa, and Wellesley – have provision funds in place so if an underlying borrower defaults, the platform can dip into their contingency fund in order to recoup the losses. Up to now, no investor has ever lost any money at all by using RateSetter. But that does not guarantee that you won’t. There are two major factors to be considered: the maturity of the platform’s portfolios and the benign state of the economy at present. As Rupert Taylor (director of AltFi) recently explained, younger loans are less likely to default, so it’s hard to gauge the quality of a particular platform’s lending with absolute certainty until they are more mature. And, none of the UK platforms – with the sole exception of Zopa – have yet been through a period of economic downturn. Contingency funds may not be able to hold up as well under the stress of a recession, when the underlying quality of a platform’s lending becomes all the more important. Peer-to-peer lending offers young investors returns that vastly out-perform those of a standard deposit account – somewhere between 3% and 15% per annum, depending on the platform. There is certainly a level of risk involved with all P2P platforms, but the return more often than not justifies that risk. 2014 has been a year of unprecedented growth for the industry. According to AltFi Data, the UK P2P and online invoice finance sectors have now supplied close to £2bn for businesses and individuals. The growth trajectory for the space is exponential – potentially reaching £3bn by the year’s end. With ISA and SIPP inclusion for P2P confirmed, a specific FCA regulatory regime in place, the emergence of dedicated peer-to-peer funds (P2P Global Investments), and a swell of government support, alternative finance represents an increasingly legitimate asset class, and that makes it pertinent for a whole new stratum of young people who are working or will work within the world of finance. It’s important for younger people to be armed with an appropriate blend of information and caution about the alternative finance industry. The overarching point is that whilst alternative finance is currently buttressed chiefly by the middle-aged, there are ways for young people to interact with the space that are worth consideration, and that are undoubtedly worth being aware of. Ryan Weeks is chief writer of AltFi The views reflected in this article are the views of the author and do not necessarily reflect the views of the global EY organisation or its member firms.