7 Key Challenges for Millennial Financial Planning
7 Key Challenges for Millennial Financial PlanningMillennials have gained a reputation for breaking many traditions set by previous generations.
One of those traditions has been their financial planning habits.
More than half of all people between the ages of 25 and 35 reporting that worrying about finances has had a negative effect on their health. Yet despite this, millennial financial planning remains scarce.
Smart financial planning can help to alleviate these fears. But it can also allow young people to start preparing for financial success in their futures.
If you’ve been thinking seriously about creating a financial plan, but have concerns, you’re not alone. Check out this list of the 7 key challenges for millennial financial planning and how you can overcome them.
1. Millennials Have Too Little Money, Making them Think They Can’t Plan
One of the biggest challenges that prevents millennial financial planning is a lack of funds. This leaves many millennials thinking that having a plan is useless.
But this challenge is easy to overcome because not having funds saved isn’t essential for starting to plan for your financial future.
In fact, when times are tough, having a financial plan is even more important.
When funds are tight, making small goals a part of your financial plan may be easier than you think. Start by putting a little money aside at a time to create an emergency fund.
Having this fund in place will help to keep you from going broke when unexpected expenses like car repairs or a trip to the emergency room arise.
2. Many Millennials aren’t Financially Literate
Another major challenge facing millennial financial planning is a lack of financial literacy.
Compared to older generations, millennials often lack knowledge of even the simplest financial terms and options.
Educating yourself on common financial decisions can help allow you to make smart decisions with your own finances. This includes interest rates, 401(k) plans, savings plans, and more.
3. Millennials Don’t Always Know Where to Turn for Help
When millennials do decide to get educated on financial solutions, they still face the challenge of figuring out who to ask for help.
Many millennials choose to turn to their parents for advice. Parents or any older peers can be great for answering basic questions. But it’s important to keep in mind that their financial situations may be very different from yours.
Be wary of trusting advice found on the internet as well. It’s best to seek advice from someone who will be able to understand your unique situation and needs.
If you’re looking for help with major questions surrounding your own personal finance options, it’s best to talk to a professional financial adviser.
4. Millennials Have Short Attention Spans
Another major challenge that prevents many young people from learning about financial planning is their short attention spans.
It’s a common joke that millennials believe that nothing should last longer than an hour. This mindset makes it tough to convince millennials to meet with a financial adviser.
Unfortunately, these meetings are essential for smart millennial financial planning.
If you’re worried about your attention span runs out, ask your adviser if you can schedule several shorter meetings rather than one long one.
5. Millennials Save for the Future, But Don’t Invest
Today’s generation of young adults may have more experience with loans, thanks to an increased need for student loans. But they have less experience with other financial decisions.
Millennial financial planning very rarely includes investing.
In fact, studies have shown that the millennial generation overwhelming distrusts stock markets. One study found that millennials tend to keep 40 percent of their portfolio in cash, even though interest rates are historically low.
Millennials could see far greater returns if they chose to invest that cash.
The solution to this millennial financial planning challenge is for younger generations to educate themselves on the stock market and investing.
If millennials still aren’t comfortable investing their money, they can talk to a financial planner about other options that may provide a greater return than a savings account.
6. Millennials Want Personalized Help
Millennials mistrust of the stock market sometimes carries over into a mistrust of other financial institutions as well.
They are wary of one-size-fits-all solutions and advice offered by banks.
But with the help of a personal financial adviser, you can get one-on-one attention. You’ll also get solutions that are tailored to fit your personal situation.
7. Millennials are Too Busy Paying Off Student Loans to Think About Other Financial Decisions
Part of the reason why millennials have such a different outlook on finances is the overwhelming amount of student debt. This generation has faced far greater amounts of student debt than past generations.
The rising costs of education have caused many young people to take out large loans to pay for it. Then, increased competition in the workplace forces them into low-paying, entry-level jobs.
Suddenly, those student loans becoming an overwhelming burden, with no foreseeable end in sight.
Big student loans can seem like a major roadblock to millennial financial planning. But in fact, they are actually yet another reason why having a plan is so important.
A financial plan allows you to examine how best to approach paying your student loans. You can plan for how you’ll pay down your loans over time. You can also consider whether refinancing or other options would help.
You shouldn’t have to continue paying on student loans a decade or two after graduation. Having a financial plan in place can help you tackle them faster so that you can start putting your money towards other financial goals.
Successful Millennial Financial Planning
Successful millennial financial planning may have its challenges.
But with a little bit of education and guidance, anyone, regardless of their age or current financial situation, can start making a plan for their financial future.
Your plan can help you see what you need to do to save for future expenses like a home or continued education, retirement, and more.
If you’re ready to start learning more about your options, or to start creating your own financial plan, contact us today to see how we can help!
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