Millennials are saving money for emergencies but could use more lessons in how to plan for their long-range needs, financial advisers say.
Many who continue to rely on the bank of mom and dad need to learn to stand on their own now that they are adults, buying homes and starting families, advisers warn.
Born in the early 1980s through the late 1990s, they are “almost a clueless generation in so many ways,” John Spooner, managing director at Morgan Stanley Wealth Management, recently told CNBC.
Most millennials are good savers when it comes to the short term, but in the wake of the recession, they aren’t really saving for the long term, says a Bank of America study.
Here are five key money lessons for millennials.
1. Offer incentives
Parents may not have created an adequate sense of ownership around money when their children were young, and they need to start, Shannon Ryan, a certified financial planner and founder of TheHeavyPurse.com, told PBS’ Next Avenue. Incentivize your child by offering a savings match — like an employer’s 401(k) match — upon reaching a specific goal or milestone. Help your son or daughter outline these goals, like buying a car or saving for a down payment, along with the steps needed to reach these objectives.
2. Set a limit on aid
Treat financial support like an allowance and cut it off at a certain point, Jeff Rose, a certified financial planner and founder of GoodFinancialCents.com, told Next Avenue. Work with your son or daughter to devise a budget by reviewing essential living expenses and debts.
3. Invest in a personal brand
Many millennials watched parents or other relatives receive pink slips after decades of loyalty to one company, says TaxAct.com. They are embracing side hustles — earning money from the sharing economy, selling jewelry, creating a tutoring business or freelancing on the weekends — and building their personal brand through blogs, networking events, social media and more.
4. Start saving early
Remind millennials that money saved compounds over time. If you save $250 a month for 40 years, and it grows at 6 percent annually, you’ll have almost $500,000, but to get to the same amount when you start saving at age 40, you’ll have to put away $1,000 a month, TIAA-CREF financial consultant John Nauss recently told US News and World Report.
5. Charge rent
Up to 1 in 3 millennials live at home, research suggests. Parents could charge their kids rent and stow the money away in a high-yield, online savings account, Next Avenue says. When your kid is ready to move out, you can provide him or her with cash toward buying a home or paying for grad school.
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