Millennials and Money: Starting the Conversation is What Matters Most

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At an estimated population of 82 million, millennials make up the largest generation in America. Born between 1980 and 1995, members of this cohort have often found themselves to be the subject of everything from think-pieces to scholarly articles in recent years. While many labels have been attached to millennials by the media, we’ll use this space to focus on how they can use their greatest asset – time – to set themselves up for success as their financial plan unfolds.

The first thing we recommend is to start the process and engage a financial planner – it’s never too early! We’ve talked about how powerful extra time in a Client’s financial plan can be in this space before, and we recommend that millennials start their financial planning journey as soon as possible. When establishing a relationship with a Client, no matter the individual’s generation, we always conduct a Discovery Meeting; during that conversation we learn what is most important to the Client by exploring what shaped their value-system and what they want their future to look like. It is in this meeting that we seek to learn the “why” behind our Client’s goals, which becomes critical as we help them navigate the trade-offs related to decisions they will face or strategies we propose.

Connecting with a planner and establishing goals is a critical first step, but that’s just the beginning of the process. The next step is creating a financial plan that speaks to the goals uncovered during the Discovery Meeting. We’ve found that using financial planning policies is a great way to meet the financial planning needs of young Clients. In Dave and Elissa’s 2014 article in the Journal of Financial Planning (“Policy-Based Financial Planning as Decision Architecture”), they note that young people are a great fit for the use of policies because they “experience many significant changes in a relatively short period of time” as they establish the trajectory of their lives, and that “policies can help them deal with multiple life changes without requiring them to reinvent the wheel” with each change in their circumstances.  We’ve previously reviewed how developing cash flow policies can clarify the best decision to make when life gets in the way of the best laid plans; this type of policy-based financial planning is critical for millennials to help ensure their financial plan has a strong base.

Building the framework for a millennial Client’s financial plan starts with cash flow planning, but certainly doesn’t end there. It is then up to the financial planner to help the Client begin addressing the rest of their financial planning needs. Some of the items we’ve helped our younger Clients tackle include:

• Managing their student loans and other types of consumer debt;
• How to take advantage of employer-provided benefits like their 401(k) or stock option plans; and
• When funding a ROTH IRA makes sense.

We hope this has been a helpful introduction to ways a young person can start their financial planning journey. If you have any questions about our process, please feel free to contact us for more information or check out some of our other pieces written on topics for millennials.