A Publication of WTVP

Despite holding different priorities than previous generations, money does matter to Generation Y.

Millennials—typically those born between 1980 and 1995 (ages 22-37), and sometimes referred to as Generation Y—are known for having financial priorities much different from the baby boomer generation. So why does money matter to them—and what are the primary financial challenges they face today? Let’s dispel some of the myths millennials may hold about traditional financial planning, and examine why they are poised to be among the best savers in history.

Alignment with Values
Millennials are cause-centric—their quest seeks meaning and memories. They desire flexibility in their lives. Time and autonomy are precious commodities; the quality of living life now is valued. They prioritize experiences over physical possessions. Consequently, millennials leave a light physical footprint on our planet. They are not encumbered with “stuff.” Traveling, eating out and events are important, not necessarily saving for a big house or fancy car.

Some interpret this generational shift in priorities to mean millennials don’t value saving: that building up a retirement account is unimportant to them. While this may not be true, it is statistically true that millennials need to save more. The urgency to save—and to start saving earlier—is the weightiest money matter facing Generation Y.

In my opinion, the admonition to save more for retirement begins with changing the conversation to emphasize why saving more ultimately aligns with millennial values. A millennial’s financial plan can and should fit perfectly with his or her financial priorities… Budgeting, saving and investing do not have to mean sacrificing quality of life now: that daily mocha or trip to England is not in jeopardy. Furthermore, accumulating a healthy retirement fund need not be about accumulating stuff; it can be about accumulating time. It’s about having enough to live now, later! Retirement dollars will fund the millennial’s future financial needs of travel, dining out and experiences later in life.

The mantra for millennials should be: save early, save often, save for now, save for later. The earlier you start (for example, starting at age 25 rather than 35), the more time your money can work for you. You can start small, but you must start now. Of the elements affecting wealth accumulation (contributions, return and time), time is a powerful ally you ought to cash in on! Earlier equals easier.

Dispelling the Myths
When millennials contemplate their approach to financial planning, several obstacles stand in the way. Millennials tend to have a lack of trust in traditional financial planning; they are more likely to trust technology or an app than a financial planner. They might find hiring a financial planner as placing limitations on their choices. There may also be confusion about the benefits of the personal financial planning process and how financial advisors are compensated. A common misperception is that you must have a lot of money to hire a financial advisor. These concerns sometimes lead to investing independently.

Do-it-yourself investing may be right for some people, but there are shortfalls to the robo-advisor approach. I’ll name one: behavior, which is a key ingredient to achieving your goals. What will you do if your portfolio drops 30 percent in one year? Emotions tend to overpower us. We need objective advice at these important junctures, and a computer cannot deliver that guidance. Investor behavior during these critical periods will play a huge role in overall returns.

Some financial planners are changing the way services are offered. Low fees, transparency, technology and accessible entry points (low initial investment minimums) are all positives for millennials looking to get their financial plans started. Innovative ways of communicating, interacting and consulting are making financial planners more accessible to Generation Y than ever before.

Millennials are loving the new financial apps, which allow them to “try out” the market and learn some investing basics. Numerous micro-investing apps allow you to round up to the next dollar on your daily purchases and invest the change in a menu of exchange-traded funds (ETFs). This is a great educational tool, which certainly can be incorporated into the planning experience.

Some financial planners offer affordable, fixed professional fees for writing plans tailored for millennials. These are simply invoiced or billed as a monthly or quarterly financial planning subscription.

Advice and Trust
Simply put, the value of financial planning cannot be overstated. Accomplishing your financial goals is more manageable with a timeframe, an action plan and professional advice.

Ultimately, a great financial advisor listens, then advises. It comes down to how well your financial counselor cares for you and engages in a healthy process… leading to actions and deliverables that leave everyone happy and fulfilled. Trust has always been, and remains, the number-one issue.

Millennials have a strong motive to invest for the future. And we, millennials, could become the best investors of our time. iBi

Philip Schmidt, CPA/PFS is Vice President of Finance & Operations with Witzig Financial Strategies in Morton, Illinois. He can be reached at (309) 282-6403 or [email protected]. Investment Advisor Representative; Cambridge Investment Research Advisors, Inc., A Registered Investment Advisor; Cambridge and Witzig Financial Strategies are not affiliated.