Despite now being in their late 20s, 30s, and even early 40s, Millennials are still having trouble checking off the boxes of becoming an adult. They are pursuing of major life milestones and financial goals, such as saving for houses and buying life insurance. Is this developmental lag a simple case of inertia? Not necessarily.
Why Do Millennials Struggle With the Business of Becoming an Adult?
The first thing that sets the Millennial generation apart is the cultural environment that surrounds it. Born and raised on the brink of the internet, these young people have been impressionable to the media’s vision of what adulthood—including love and romance, family life, and financial success—looks like.
In reality, adulthood is not like the movies, be it “The Wolf of Wall Street” or “Silver Linings Playbook.” And although Millennials don’t want to think of themselves as following a traditional life path, there are certain checkboxes and financial goals that should be on their radars.
It’s important for members of this generation to acknowledge that investing and building up financial savings are not simple pursuits reserved for bankers or high earners. It’s possible to take investment techniques and apply them to individual situations or, essentially, to take what works and leave the rest. Life insurance, for example, is increasingly left off the table as an employment benefit. And Millennials are now researching and purchasing insurance plans that work for them individually.
In addition to their unique cultural upbringing, Millennials face more societal and economic uncertainty than generations preceding them. Not since the Great Depression have markets been so volatile and children been destined to be less well off than their parents. Considering all these factors working against Millennials, it’s no surprise that they might need extra support to set goals for the future.
Top Advice for Millennials Trying to Set Financial Goals
Once Millennials accept that there are ways to achieve financial freedom and security—without necessarily following a traditional blueprint—what boxes should actually make it onto their managing money checklists?
1. Establish an emergency fund.
The first thing to do when trying to take control of your financial future as a Millennial is to create a financial buffer in case of any type of emergency. An emergency fund is the foundation of your financial savings and doesn’t necessarily have to be reserved for emergencies: It also gives you a source to tap into if an amazing business opportunity comes up, such as “buying the dip” in the stock market. This could help you buy additional equity in your company if the opportunity presents itself. How much of an emergency fund should you have on hand? Most financial experts recommend giving yourself a six-month buffer so you can still pay for necessities such as food, shelter, and utilities if you were to be out of work for a few months.
2. Set healthy spending habits.
Creating healthy habits means being honest with yourself about what kind of money personality you have. Are you able to cut back on basic expenses when necessary? Do you need to regularly go out to eat or buy clothes to feel good? We all have desires, and that’s okay; the point is to be honest about our habits and learn to balance the unhealthier ones with ones that aid our financial savings efforts.
3. Learn how to invest.
Time is the most powerful asset Millennials have. They might not be as well off as their folks, but time is on their side. That’s why investing is a very underrated tool for this age group. Compound interest allows wealth to grow without you needing to earn more. So, make investments and let compounding interest do all the work.
You might need help visualizing this, so let’s take two college grads as an example. One grad saves $250 a month in a tax-deferred investment account for 10 years and then doesn’t make any additional pay-in for 30 years. The second grad doesn’t invest anything for the first 10 years but spends the subsequent 30 paying. The first grad is still going to be far better off—more than $100,000 better off, in fact—because they started earlier.
The bottom line is if you are saving and investing excess funds for the next few decades, the probability of you having the financial means to do the things you desire is high. The best financial decisions are made early. So, plan for what you want now, whether it’s a pair of sneakers or financial stability.