Twas the Thursday before Christmas and I was finally able to schedule one of the more gratifying new client meetings of my career.
After dropping my new grandpuppy (her name is Molly) off at the house, my newlywed Millennial daughter and her husband stopped by the office for their first financial planning meeting.
She’s been asking me to help her “invest” for about a year now, but I’ve been resisting. I wanted her young family to go through the proper sequence of financial progression before we got started with long-term investing.
First, I had suggested that she accumulate an emergency fund of at least $2,000, saved and isolated in a separate account from her day-to-day spending accounts. This, of course, serves the purpose of keeping the family out of debt when “life happens.” After that milestone was reached, the young couple was challenged to accumulate at least six months of family expenses deposited in some sort of interest-bearing account.
While working toward these goals, both she and her husband became eligible to contribute to their 401(k)s at work. Her employer matched contributions, his didn’t. At ages 23 for her, and 25 for him, I advised her to contribute just enough to get the full match and to use a more aggressive long-term growth fund. I suggested he could skip his for now, I’ve seen far too many young families with nice 401(k) balances and no cash for emergencies or shorter term goals. With no match, if he really felt he needed to save for a far-off retirement, a Roth IRA might provide better benefits over time anyway. He decided to skip both for now.
She really hadn’t been in Northwest Indiana on a weekday in a while, so when she requested the meeting, I was excited to see how much headway they had made toward the goals we had discussed.
I was impressed. The emergency fund and six months of expenses goals were well in the bag, and she was proud of how much she had already in her 401(k), and they now had a bit of an excess nest egg they could start to invest in longer-term growth strategies.
I suggested a low-cost stock mutual fund, or if they wanted, they had enough investment money to pick a few individual stocks. She texted her teenage brother for some stock ideas. At that point, I said, “how about the mutual fund," which will also make it easier to add money every month, which is something they were eager to do.
My daughter and her husband are not my first Millennial clients. Sometimes the Millennial generation can get a bad rap. We’ve all heard the Millennials aren't interested in marriage or careers and they want everything for free. We Gen-Xers have been occasionally guilty of a bit of helicopter parenting ourselves and the stereotype of the entitled, “participation trophy," unmotivated basement dwelling Millennial is probably partly our fault.
The funny thing about stereotypes is that they often ring at least slightly true, but in my experience, however, this young adult generation is anything but irresponsible. The Millennial families I’ve experienced and worked with border on being financially conservative, and they are definitely frugal. Some recent financial industry studies have borne my perceptions out.
As the massive Millennial generation moves through adulthood I am sure they will do their part as workers, consumers, parents, and investors to continue to make our great nation stronger and stronger.