Smart financial planning strategies to borrow from women and millennials

We have so much to learn — but so did they. Here’s what they’re doing right.
by Jean Chatzky /  / Updated 
As a general rule, neither millennials nor women are afraid to ask questions, and that’s giving them a leg up when it comes to planning for the future.
As a general rule, neither millennials nor women are afraid to ask questions, and that’s giving them a leg up when it comes to planning for the future.
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Lately the headlines in personal finance have been pretty bleak — the average 2017 graduate has nearly $40,000 in student loans, millennial homeownership is down, and 39 percent of Americans have no savings at all. Even if you’re not concerned about your financial future, you may well be worried about a child’s, a sibling’s or someone else’s.

Thankfully, there are a few bright spots out there. A new piece of research from Schwab, the 2018 Modern Wealth Index, highlighted a few of them — including the fact that millennials are actually the best financial planners of any generational group. Thirty-one percent have a written financial plan, compared with just 20 percent of Gen X and 22 percent of Boomers. They also best others when it comes to goal-setting and saving. Meanwhile, women emerged as being better long-term investors and than men, and they’re more likely to research major purchases.

Here's a look at some of the things millennials and women are doing right, and how you can put their winning strategies to use in your life.

1. They ask questions

As a general rule, neither millennials nor women are afraid to ask questions, and that’s giving them a leg up, says Holly Newman Kroft, managing director of wealth management at Neuberger Berman. “Many millennials are living with a large burden of student loans, and they haven’t accumulated assets, so they’re a little hesitant about investing. They ask questions because they want to make sure they’re doing the right thing.”

Asking questions about finances shouldn’t be any different or more intimidating than asking questions in any other area of your life, Kroft says. “Are you going to go to the doctor and just blindly take medical advice or drugs? You’re probably going to research your condition, and be your own advocate when you go in there —you should be the same way with your financial advisor.” When you ask more questions, you increase your understanding, which is empowering — you’ll be less likely to panic in times of market turmoil, Kroft says. “People are always more scared of the things they don’t understand.”

When you ask more questions, you increase your understanding, which is empowering — you’ll be less likely to panic in times of market turmoil.

2. They’re joining groups

Social media and other online communities have led to a proliferation of virtual and real-world spaces where people can support each other’s financial struggles, decisions and successes. “I would call them support groups,” Kroft says, “But they’re really more like clubs. I see people discussing everything from going back to work while breastfeeding to finding the right financial planner. People are really just looking to find a community, get educated and share advice.”

Instagram, Twitter, and Facebook have really changed the game when it comes to people connecting on important topics, explains Chris Britt, CEO and co-founder of banking app Chime. “If you’ve found something that’s been helpful to you, there’s a natural instinct to want to share it with others,” he says.

3. They aren't overconfident

“We’ve seen that women, for whatever reason, are not quite as confident when it comes to financial planning, and because of that, they feel the need to be more conservative,” says Alyssa Schaefer, CMO and Head of Product Experience at online lender Laurel Road. While it’s never a good thing for people to feel insecure, a little humility when it comes to investing can be a good thing. According to a study by Laurel Road, women had a more conservative outlook when it came to their emergency funds — while men thought they needed $8,000, women thought they needed $10,000. “Women seem to know that there is no such thing as ‘later’ when it comes to planning for their financial future,” Schaefer says.

Likewise, millennials, who were just starting their careers in 2008, are living their financial lives prepared for something bad to happen, Kroft says. “They won’t assume they know the best thing to do without doing a lot of research on it,” she explains.

4. They don’t compete to keep up

“Very rarely do my women clients come to me saying, ‘My friend is getting better returns than I am — I want that,’ but I do see that from men,” Kroft says. “Women don’t care what their friends are doing, and they aren’t trying to win a race.” Instead, they ask questions that pertain to them, and they spend more time making sure their investments are set up to meet their goals, rather than trying to beat the market. This is generally a wise strategy. You shouldn’t be calling up your financial manager and asking to change up your entire portfolio because of a tip you got at a cocktail party. Instead, you should see your investments as part of a long game to reach a long term goal of financial security. “Investing is a lot of things, but it’s not a competition,” Kroft says.

5. They use debit and automation to stay in control

More millennials prefer debit cards to credit cards for one simple reason — with debit, they’re in control, Britt explains. According to a report by Visa, 28 percent of millennials use debit cards for the majority of their purchases, and Britt says that trend is likely to continue. “People know that with credit cards, they’re more likely to go to the mall and buy that thing that they shouldn’t have bought. Many of them know what it’s like to have $3,000 worth of credit card debt hangover that they’re trying to work through.”

Millennials are also leaning more towards automating their savings, which allows them to “set it and forget it,” Britt says, adding that 92 percent of Chime customers who open checking and savings accounts also sign up for the automatic savings feature, which moves a predetermined amount of money from checking into savings. People don’t have time to miss their money, Britt says. “If you ask someone if they plan to save, they would say yes, absolutely — but they don’t always put that into practice. When your saving is automated, it doesn’t matter how disciplined you are, it’s just happening in the background without you having to think about it.”

With Kathryn Tuggle

HOW TO SAVE MORE MONEY

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