It is never too early to let young clients know they must start creating good financial habits to help them achieve a successful retirement later in life. Millennials, being a young and diverse generation, are in a great position to take advantage of the many opportunities available today that will put them ahead when it comes to planning for their future.
Four healthy financial habits to teach young clients and prospects
1. Saving consistently is key
Young clients may feel it is hurting them to put money away at such a young age because that means they have less to spend now. However, the most obvious strategy for reaching a successful retirement is to start saving as soon as possible. This is even more crucial for Millennials because they are at the age where they can take full advantage of compounding interest. Compounding interest can be thought of as “interest on interest,” and will make their savings grow at a faster rate than simple interest.
Whether it is a savings account or a retirement account, getting money in that pool of growth as soon as possible is an essential strategy for young clients to get a great head start on their retirement goals.
2. Use your resources
So your client had a little too much fun the previous night, and now you they are terrified to check their bank account through their mobile app. Advise them to check it as often as possible! Another advantage Millennials have is that they have so many resources available to them, thanks to technology and their comfort in using it. A good habit they can get into at a young age is to utilize all available resources to keep awareness. We live in an era where information is readily available at the click of a button.
Familiarize young clients with the different vehicles used to save money, the types of investments that make up their retirement accounts, and research strategies that will allow them to be on track financially for their future. There is no such thing as checking on your finances too much, especially when it is so easy to do so nowadays.
3. Spend wisely
Young clients should be aware that advertising drives the consumer market by creating needs. It is easy to get caught up in this as a consumer, which is why it is so important to spend wisely. Young clients must remember that there is a difference between wanting something and needing something.
Making sure your clients are able to differentiate between the two will be imperative when it comes to using their money. The next step in spending wisely is creating a budget that will allow them to track their expenses and enable them to optimize their spending habits. The less money they waste, the more they will have available to save for retirement without emptying their wallet.
4. Pay off debt as quickly as possible
One of the biggest concerns for Millennials, especially right after coming out of school, is debt. An intelligent strategy they should know is to pay this off as quickly as possible. While they are paying this down, it is best to advise against taking on new debt if possible.
The interest that is accumulated will hurt them in the long run when trying to save money. Paying off debt should be one of their top priorities after living necessities.
Educate clients and grow your business
By teaching young clients to save and spend wisely, you are setting them up for a very successful financial future. Advisors must become familiar with the FinTech tools available to manage finances in order to properly educate their clients on how to utilize these tools in their lives. By doing this, advisors are adding value to the client relationship, and are also providing a better client experience which will help increase referrals and enable them to achieve business growth goals.