Millennials are quickly approaching, or in the midst of first jobs, houses, weddings and kids.
These life changes and investments often require money.
Financial adviser Brian Williamson said he sees a lot of millennials, those born between 1981 and 1996, come to the Frederick office of Veridean Capital Partners to ask for financial guidance.
“A lot of times people come in because they have some significant life event … that kind of sets off a light bulb and they say, ‘Oh, maybe I should talk with a financial professional before I make some of these significant decisions,’” he said.
The average net worth, assets minus liabilities, of an American millennial is about $8,000, according to the Washington Post and a new Deloitte study released this year.
This is a 34 percent decrease in the net worth of millennial Americans since 1996, according to the Post.
Williamson said it’s not all bad news.
“I think millennials are facing some challenges with student loans and other societal factors, but overall I think they have many of the same opportunities that different generations and groups have had,” he said.
Brennan Gmeiner, a financial adviser at Frederick’s Turning Point Financial, said he also sees many millennials come in looking for information about finances.
“Unfortunately, most of the millennials that I’ve seen weren’t educated on investing or personal finance,” he wrote in an email. “Growing up with the internet is a blessing to be able to find information so quickly. However, people searching online for information can find themselves getting ‘information overload’ and wondering how to filter through all the ‘noise’ or bad information that is out there.”
Gmeiner said one reason millennials may struggle to build wealth is that higher education institutions “don’t focus on teaching the real-world ‘need-to-knows’ on personal finance.”
Another reason could be student loans.
“How can millennials with this debt also focus on investing? It becomes a competing priority on whether they should pay down debt or invest their money,” he wrote.
But here are several ways that millennials can still increase their wealth.
One way, according to Williamson, is avoiding debt and paying debt off as quickly as possible.
“Credit cards, while they can be useful can also be the enemy of wealth building,” he said.
According to data from Experian, a consumer credit reporting company, American millennials had an average of more than $4,000 each in credit card debt in the first quarter of 2019.
This is in addition to student loan debt, which has more than doubled in the past decade, according to NPR.
American student loan debt is now about $1.5 trillion, and earlier this year the Federal Reserve estimated that student loan debt is responsible for about 20 percent of the overall decline in homeownership rates between 2005 and 2014 for people ages 24 to 32, according to NPR.
Gmeiner said millennials should start saving money right way.
“The earlier you save the better chances you have of your investments accumulating and your net worth increasing,” he wrote in an email.
Williamson said people should treat building wealth and saving money the same way they treat their cellphone bills or their rent: Have it automatically come out of their checking or savings accounts each month.
“It happens without you even thinking about it,” he said.
Millennials should also be intentional about their spending habits, Gmeiner wrote.
“If accumulating wealth is important to you, prioritize that along with your other goals,” he wrote.
Another way for millennials to increase their wealth is to “maximize any employer contributions into plans that you may already be saving for retirement and growing wealth that way,” Williamson said.
An example would be to put a certain percentage of money into a 401(k) retirement plan that an employer would then be willing to match.
Gmeiner said millennials should also look into refinancing their student loans.
“Sometimes refinancing loans can help you pay them off many years faster,” he wrote. “If not, you can always pay more into the loans to pay down the principal faster.”
Refinancing is when an existing loan is replaced with a new loan with different, and hopefully improved, terms.
Williamson said it’s also important for millennials to talk to and seek advice from trusted individuals or financial professionals.
“A lot of times people don’t know what they don’t know, and having those conversations, they can really be enlightening.”
“If you get stuck, don’t be afraid to ask for help from a professional,” he wrote. “Older family members might also have good advice, so ask them, too.”
Building wealth and saving for retirement also doesn’t have to happen through an employer.
“Anyone can open up a retirement savings account and contribute to it so long as they’re working,” Williamson said.
Gmeiner said that millennials can increase wealth by contributing to a retirement plan.
“If you don’t have one, a good starting point for most people is a ROTH IRA,” he wrote.
A Roth IRA is a retirement account set up by the individual at any financial institution.
For millennials who haven’t started investing yet, Williamson said there’s still time.
“It’s truly never too late to start thinking about money management and saving money. There’s always opportunities for strategies no matter what age you are,” he said. “A dollar saved in your 30s can mean four, five or six dollars once you get to age 60 or 70 and so the earlier the better, but it’s never too late.”