Millennials, the name for the generation of 18-35 year olds, represent 24% of the United States, or over 77 million adults. This group often gets a bad reputation for being entitled, self-obsessed, and un-focused. But, in most cases these labels are unfairly applied.
A large portion of this generation is just graduating from college, starting new careers and, like all generations before them, are trying to establish themselves in “the real word.” Despite their confident nature, many struggle with, and worry about, their finances.
For Millennials who are just starting to make their way on their own, here are 4 ways you can help them focus their finances.
- Tackling High-Interest Debt
One of the benefits of using student loans to finance higher education is the six-month grace period extended after graduation before loan repayment begins. Encourage your millennial members to take advantage of this six month grace period to tackle other high-interest debt they may be carrying, specifically credit card debt.
There are a few steps that can be taken to help get credit card debt under control.
- Contact their credit card company and request a rate decrease
- Transfer outstanding credit card debt to a low-interest or no-interest credit card
- Focus on the credit card with the highest interest rates and put any extra funds available each month towards making more than the minimum payments to that card
Once they have their credit card debt under control, encourage responsible credit card use. These members are just starting to build their credit history so making payments on time and steering clear of max credit limits will go a long way in building up their credit score.
- Obtaining Insurance
Insurance is a financial necessity that often gets overlooked by younger adults, whether it’s health insurance, life insurance or renters insurance. They either pass on insurance coverage completely or opt for the most basic coverage available. But this money-saving tactic can end up busting their finances if they get sick or have a fender bender and have to pay out of pocket.
A recent survey of the Millennial generation showed that 24% of adults ages 18-29 don’t have health insurance. Only 64% of these same adults have auto insurance, and only 12% carry renters insurance.
Encourage your young members to to look into health insurance, auto insurance and renters insurance coverage at the very least.
- Growing Emergency Savings
We never know what kind of curve balls life is going to throw our way, so it’s important for Millennials to develop an emergency savings fund. Whether it’s due to a rocky economy or a medical emergency, they may, at some point, experience a slower income stream. Recommend a plan to build savings that can cover 3-6 months of expenses.
Whatever amount that can be contributed to emergency savings each month, should be deposited into a high interest-earning account, such as money market savings. Most importantly, ensure they choose a new account that allows quick access to their money, with no fees or penalties for withdrawal, if an emergency does occur.
- Planning for Retirement
As a young adult, retirement seems like a lifetime away. But building a retirement fund in your 20s is the smartest way to ensure a comfortable lifestyle in your later years. People who start saving in their 20s, build a much larger nest egg (almost double!) than those who wait until their 30s to start retirement planning.
As soon as it’s offered by their employer, millennial members need to take advantage of their company’s 401K program. If young adult members are a little further into their careers, funds from previous 401Ks can be rolled into an Individual Retirement Account (IRA). Explain the various options of growing a retirement fund while taking advantage of tax benefits that IRAs offer.
Focusing their newly acquired finances to these key areas will set Millennials on a pathway for financial success.