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  • [The Top 10] Pieces of Retirement Advice You Can Give Your Millennial

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    best way for millennials to invest

    If you were born between the early 1980's and 1990's, then you belong to the Generation Y or what is popularly known as millennials. Millennials are known for their self-confidence, creativity, and ability to adopt new concepts, ideas, and practices. But among the numerous positive adjectives that describe the generation, however, financially literate and adept investors are not one of them.

    But the common notion that millennials would rather burn all their hard earned cash on Starbucks and iPhones rather than set it aside for the future is quite overblown, as several recent studies have shown that most 20 and 30 something young adults are in fact pretty good at saving. The problem, however, is that the studies also indicate that the generation is quite fearful when it comes to investing their cache for retirement. They also don't know the right answer to the important question "what should millennials invest in?".

    Whether it's due to a lack of education or its simply not a priority, shying away from investing can potentially hurt millennials in the long run. But we're hoping that it's the former as we have 10 pieces investing advice for millennials that will help them build a nest egg so they can enjoy their retirement days with great financial freedom.

    1. Lessen your expenses

    First things first, before you begin asking what should millennials invest in, you might want to evaluate your purchasing patterns first. Instead of taking your dinners in a restaurant or your coffee breaks in fancy cafes, consider cheaper alternatives first. Perhaps you can cut off some costs by preparing your own meals? Keep in mind that minor changes in your lifestyle can give you plenty of financial freedom in the long run.

    Retirement days with great financial freedom

    2. Compound interest is your biggest ally

    If you're a millennial, time is your biggest ally and so is compound interest. Think of it this way, if you invest $100 today, with a 5% return for 20 years, it will compound to $200 once your retirement period begins. Simply put, your money will have grown twice over a certain period of time and can even triple if you start early. And the best part is, you won't be breaking any sweat for your money to grow. So if you're looking for perhaps the best way for millennials to invest in, compound interest is something that you should consider heavily, and right away.

    3. Prioritize needs over wants

    This millennial investment guide is related to #1 as it can help you lower your costs so you can set aside more money for the future and on different investment options. This involves taking control of your finances by first identifying where your money goes in the first month. This way, you will know if you are actually spending on things that you need rather than those that you want. As much as possible, you want to cut spending on things that are deemed "unnecessary" and limit your expenses to those that are vital to your living such as food and clothing.

    4. Don't let your money sleep

    One of the best pieces of investing advice for millennials that you can follow is never to let your money sleep. There are millennials who possess superb income stream and savings rate but have six figures of cash stashed somewhere with zero earnings. The best thing to do would be to establish an effective scheme that would allow your money to start earning interest, work on identifying earning opportunities, and ensure that the cash on hand is put into optimum use.

    5. Make some minor tweaks

    A good millennial investment guide always includes a change in perspective. If you think that making minor improvements in your savings will deprive you of your youth (no more hanging out with friends and out-of-town trips), then you're absolutely wrong. Setting aside enough money for retirement doesn't mean that you will have to lose all your friends and those activities that you enjoy doing in the process. It simply means that you will have to do them twice every week instead of three. This is a minor tweak that you can do in your lifestyle that will make a major impact on your financial health once you decide to enter retirement.

    6. Don't shy away from investing in stocks

    So what should millennials invest in? There are plenty, but stocks should be one of them. Unfortunately, plenty of millennials are quite wary when it comes to putting their money in the stock market and understandably so. When the market crashed in the first decade of the new millennium, a lot of millennials witnessed their parents and relatives lose a lot of money.

    There is certainly risk involved when it comes to investing in stocks, but the same can be said with just about any other type of investment for that matter. And when you look at the stock market in the United States, the average ROI (Return on investment) for investors has always been at a decent 10%. This kind of return can be a great way to boost your money instead of hoarding it in cash or investing it in low-return options like bonds.

    7. Pay off your debt while saving

    Before you can pursue the best way for millennials to invest, like stocks and compound interest options, you need to pay off all existing debts first. Student loans for one, are one of the biggest hurdles to savings but it's important that you hit both birds in one stone, that is channeling your earning to paying off debt and then saving what's left.

    The best way to go about this is by setting an emergency fund that is worth half a year of your present income. This is important as an emergency fund will prevent you from incurring more debt when the unexpected happens. After that, clear off any loan or debt against you and you are on your way to investing your hard earned cash for retirement. Also, be sure the prioritize those high-interest rate loans first.

    Saving for retirement

    8. Take advantage of technology

    This investing advice for millennials is quite natural for 20 and 30 something young adults. Afterall, millennials are known for their open-minded and tech-savvy attributes which means it would be easy to take advantage of apps like Mint and Personal Capital to determine where the money is going every month and how they can make an appropriately disciplined financial plan.

    9. Make savings automatic

    The best way for millennials to invest their way to retirement is to make savings automatic. This means instantly saving 20% of your salary for the next 20 years after retirement. Many experts will also advise as much as 40% but this may be too high of a number to keep up. As a good rule of thumb, automatically set aside 20% - 40% of your earnings every month so you will have more than enough money to spend on your retirement.

    10. Consider it as one of your top priorities

    As a final tip for this millennial investment guide, always make it a point to prioritize saving for retirement and enjoying compound interest earnings even if you are purchasing your new house or car or clearing of your student loans. Who knows, maybe the next president would pass a bill that would pardon everyone's student loan debt? But one this is for sure though, no president will ever give you a million dollars for your retirement, so it's always best to make your own nest egg while it's still early.
    Curtis Ray
    Apr 09, 2018
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