The ideas of saving, for retirement or otherwise, seem like a world away to many millennials, or if we’re more fair to any young person of any generation. Companies have only recently begun to push the concept of financial wellness; the idea that you need to think about everything from the rate of interest on your credit card to whether you’re planning enough for retirement or knowing just how much their loans are costing them.
For example, people aren’t huge fans of loan reconsolidation companies (the ones that will pay off your loans and then combine them into a lower monthly payment that ends up costing a boat load more). However, Sofi turned this on its head by letting accredited investors (the same ones that can invest in startups via the JOBS act) “invest” in student loan reconsolidation, paying off the loans and offering a reasonable monthly payment. It’s a good investment for the investor, without the loan shark style of those 1800 commercials.
This has also altered the fabric of the retirement industry. Companies like FutureAdvisor, Betterment and Wealthfront have grown by using a combination of computer and human intelligence to invest and re-invest their customers’ money. This is a stark change from calling a financial advisor that would simply make a few moves a year and take a fee off the top. FutureAdvisor, for example, offers free products that automatically evaluate your portfolio and work with you depending on your goals to invest in a particular way. When you invest in your retirement, which may be anywhere from 20 to 40 years away depending on when you start.
This means that FutureAdvisor’s algorithm and investment council work to make the best decisions with your money, which in long-term retirement requires particular diversification of money, rebalancing and “tax-loss harvesting” to avoid losses, in addition to giving you a realistic goal based on what you want to be “paid” a year in retirement. Conversely, they have also just launched FutureGift, which allows you to create a page for people to contribute to your child’s college fund (and every four contributions get you $25). As it’s a smaller amount of money to invest and a smaller goal to reach than your eventual retirement, FutureAdvisor invests it in a different way for a potentially quicker return, much like their college savings program. Though nobody can promise how much or how little your money will increase, it’s a lot better to be intelligent than letting your money sit. FutureGift and College Savings are both free, and the “premium” service, after its three-month trial, costs 0.5% of your investable assets.
The intimidating world of preparing for retirement is also being attacked through barrier to entry. Wealthfront recently lowered their initial investment amount for users to $500, meaning that even the most cash-strapped millennial can start something. Though $500 isn’t going to go far (a good retirement calculator will tell you what to save), it’s a nice option for those who want something in the future to fall back on. Compound interest, even in a totally benign, low-interest account, is still effectively free money.
Even though plenty of people are making fun of the irresponsible millennials and their demands, there may be more myth to how risk-friendly they are. According to a TIME article, the younger generation is superior; millennials apparently have better saving habits than the older generation. Maybe it’s time we stopped making jokes about them being snake people.