Five Critical Financial Issues Millennials Face
It is very clear that millennials face a very different financial landscape from older generations. Gone are the days of pensions, a lifetime of service to a single company, and real estate costs in check with single income earner households. Additionally, the following issues are unique to Generation Y:
- Because of helicopter parenting, they tend to be frozen with fear and unable to make independent decisions without parents approving their professional plans. Consequently, professional advisors struggle to help them because dad the plumber has a "better" opinion based on their own limited knowledge of the future that a young person faces. The parents’ experience is vastly different from the world these younger people face.
- They are woefully unaware of their 401k works and they only seem to check off target date funds that may or may not fit their needs.
- It's no secret that they are saddled with debt from school and reluctant to save money at a 7% rate of return when they have student loans of nearly equal interest.
- Locally, there is a cultural bias towards property ownership over investments that are not hard assets. Often these people have no idea how to model the return on their investment nor do they fully understand the legal aspects and risks of becoming a landlord.
- Wages continue to be suppressed and budgeting skills are sorely lacking. High costs of living and unrealistic consumption patterns make saving for retirement even more difficult.
What these and many other conditions indicate is that times have changed. The world of the Baby Boomer and Gen X are gone and preparation for financial goals is more challenging than ever before. Parental advice is dated and often wrong in today's context. Back in the day, a Baby Boomer could work on his/her car because it was less complicated. Today, only a skilled technician can do that work because it is a much more complicated and nuanced machine. The same holds true for financial vehicles. I would strongly encourage any young person to have a free consultation with a skilled professional who will evaluate their needs based on their goals and best interest. Not just from an offense perspective but with defensive considerations as well. Time is the one thing that cannot be influenced and they need to act today.
Article by Tim Ehlers.
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