Monday, March 23, 2015

The millennial way of investing: Getting a head start on wealth building

Eight in every 10 millennials in America say the dire outcomes of the 2008 economic recession has taught them how to save and spend wiser. This is according to a survey by wealth management firm Wells Fargo. Despite this, only 55 percent of them are saving up for the future. But two great observations stand out among the major takeaways from the survey: first, that majority of millennials are more open and confident about saving, and second; they are keen on seeking financial advice.


Image Source: millennialmoneyman.com
Some others do not quite know where and how to get started. For this group, the first and wisest step, most financial experts stress, is to set aside at least six to 12 months of living expenses for unexpected emergencies.

The next step is exploring investment options that fit one’s age, income, and appetite for risks. Contrary to popular notion, millennials and college students can start building wealth as early as they want using sound financial instruments like the Individual retirement account (IRA). For emerging self-employed and low-income individuals, Roth IRA is the best option. With a minimum amount of $100, millennials can save up for retirement, accidents, and any future life event. They can likewise adjust their contributions as they climb the money ladder, to up to $5500. Best of all, any income accrued by investment is tax-free.

Image Source: thinkadvisor.com
Likewise, if millennials happen to work in a company offering a retirement plan, they should consider themselves lucky enough for such opportunity, according to Nasdaq's guide to investing for millennials. Millennials should take advantage of it as soon as they are eligible. They should also be mindful of the contribution guidelines, company match, and profit sharing schemes.

Better still, it is best for millennials to read up on the basics of investing. Countless books are available that offer sound and realistic advice. Some of the best (and free) financial advice comes from the Internet, thanks to websites such as Nerd Wallet, Investopedia, and Mint.com. If millennials wish to take their investing skills a notch higher, the Financial Planning Association holds free Financial Planning Day in several areas. They can check out the association’s website to see if there is one coming up in their area and get started.

Image Source: forbes.com
But the best news for eager and financial savvy millennials, according to Sophia Bera of Daily Finance, is that paying for financial advice has become more affordable than ever for Gen Y people. A group called XY Planning Network is a great option for the younger set, as the financial planners are fellow millennials who can directly relate to needs and concerns of their clients and offer more flexible strategies.

As the owner of financial services and money management firm Granite Pacific International and a former principal at Selman, Ross and Ranhofer, John Ranhofer dispenses sound financial advice to people of all ages. Subscribe to this blog for more financial advice and insight.

4 comments:

  1. Investing in early childhood nutrition is a surefire strategy. The returns are incredibly high.

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  2. "Set aside at least six to 12 months of living expenses for unexpected emergencies." I really need this tip.

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  3. Because we already have jobs, doesn't mean we can spend everything we earn. We are always taught to save and be ready for whatever might happen in the future.

    ReplyDelete