5 Things Millennials Wish They Knew About Finance — Money Experts Weigh In To Help
Written by
Dawn Allcot
Edited by
Zuri Anderson
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As with any generation, as millennials fly past the quarter-century mark and the oldest of the cohort approaches middle age, many look back with financial regrets.
Sure, 43 years old is not too old to start saving for retirement, buy a new home or even make a plan to retire early. But with more financial knowledge, many millennials might be in a much better spot.
According to MX, only 25% of millennials feel completely financially secure today. In another survey from 2022 by MX, more than half (56%) cited money as their primary cause of stress.
What money tips could have helped millennials in the past and also help them forge a solid financial footing for the future?
The Power of Compound Interest
Compound interest is so widely touted as a solution to growing wealth everyone should understand it by now. But that’s not necessarily the case.
The sooner millennials grasp the power of compound interest, the bigger they can begin growing their nest egg.
“Time is the greatest ally of the investor because of the ‘magic’ of compound interest,” explained Robert R. Johnson, PhD, CFA, CAIA, and professor of finance at Heider College of Business, Creighton University.
Yet, he reminded millennials, “When it comes to building wealth, one can either sleep well or eat well. Investing conservatively allows one to sleep well, as there isn’t much volatility. But it doesn’t allow you to eat well in the long run because your account won’t grow much.
“The surest way to build wealth over long-time horizons is to invest in a diversified portfolio of common stocks. Someone with a long-time horizon should not have exposure to money market instruments, yet many investors do because they fear the volatility of the stock market.”
There Are No Limits to How Much You Can Earn
While investing remains solid advice across generations, many millennials wish they had learned earlier in life that the world doesn’t work the same way it did for their grandparents or their parents.
“Growing up, my entire generation was brought up with this mindset and conditioning that you had to pick one career, get a job at the first company that hires you in that field, and then work your way up through the positions for the rest of your life,” said Armine Alajian, founder and CPA at Alajian Group, Inc., an accounting firm with locations in Los Angeles and New York.
“We were taught these things for years, and the reality is the world just doesn’t work like that anymore.”
She continued, “There is also a glass ceiling where we put limits on ourselves with what our salary should be. My generation was taught to be content with the salary at the job we get. We shouldn’t ask for more because we’re supposed to be thankful that they hired us in the first place.
“The biggest thing I wish millennials knew about money is we have to trust in ourselves, build on our own and learn on our own.”
How To Get a No-Loan Education
Tatiana Tsoir, CEO and CPA at Linza Advisors Inc. and author of “Dream Bold, Start Smart,” said that she sees her millennial peers and also younger Gen Z individuals who regret shelling out big money for student loans for a bachelor’s degree.
“My 32- and 28-year-old nephews are a great example,” she said. “Both went for their bachelor’s at a significant amount of money. Both regret not going to a state school, staying home, getting scholarships and getting their education for the least amount possible.”
The Basics of Taxes and Other Financial Fundamentals
Tsoir also pointed out another issue millennials have faced: A lack of basic financial skills.
“The biggest block to financial management is that there is no culture of explaining or talking about the money basics as kids grow up,” she said. “As a result, the millennial generation doesn’t often understand the consequences of their financial decisions ahead of time.”
Aliaiian agreed that learning the basics, even in your 30s or 40s, pays off.
“Taking the time to learn financial fundamentals, especially the ins and outs of taxes, can be one of the biggest financial game changers for you,” Alajian said.
A Road Plan for the Future
Finally, Tsoir sees many millennials struggling because they don’t have a clear roadmap for the future.
“They just swim with the current and kind of watch where the current takes them,” she said. “Building your present starts with understanding how you want to live in the future: Retirement (when, how much do you need, what are you going to do in retirement), protecting your loved ones (life insurance, disability), setting savings aside for a rainy day, protecting yourself with a personal umbrella policy, looking to see where you’d like to be financially in five, 10 or 15 years, and what steps do you need to take today to be there.”
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