Investing is the surest way to grow wealth, yet many millennials lack the financial literacy and excess cash to feel comfortable with investments. Even baby steps toward investing can help this generation build wealth and save for their future. Use these four strategies to encourage millennials to invest.
1. Offer Financial Literacy Education
The top reason millennials don't invest is lack of knowledge. Most millennials do not have the financial literacy skills to develop an investment strategy, stick with it, and make decisions. The stock market can be confusing and many millennials believe it will take a lot of time to learn about the market. Companies can take the lead here with financial literacy basics that demystify the world of investing for millennials.
By offering webinars or email courses around basic financial topics, from stocks and bonds to types of retirement accounts, you can show millennials that you provide easy-to-digest information to help them build confidence when it comes to money. When they are ready to invest, they'll explore your offerings.
One area where millennials need better financial education is around the concept of risk. Millennials who have invested keep a larger percentage of cash than older investors. Some prefer bonds to stocks. These are classic moves of risk-averse investors who want to protect their money. Of course, with inflation, these so-called safe moves end up costing young investors in the long run. By demystifying risk and showing investors the true cost of keeping their assets, you can help them take the plunge with stocks, mutual funds, or exchange-traded funds that will greatly increase the value of their portfolios.
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2. Encourage Micro Investments
Lack of money is the second most common reason millennials avoid the market. Between student loan debt, living expenses, and saving for goals like home ownership, there's not much extra to invest. When it comes to investing, building good habits early will help these investors benefit from compounding.
Show these clients how they can build wealth with micro investments with infographics and charts that make the topic approachable and understandable. Data visualization can help millennials see the bigger picture. With a better understanding of the relationship between slow, steady investments and wealth generation, these clients will lose their resistance to investing.
3. Offer Online Tools
Online tools simplify investing: With apps on their phone, millennials can check the market or adjust their portfolio anytime. There are apps for every financial need, from online banking and money transfer to market news and brokerage accounts. The rise in robo-advisors means that millennials can fund an account, answer a survey, and receive a portfolio that's customized to their risk preferences.
4. Promote a Balanced Outlook
The right tools won't do much for millennial investors until they overcome their outsized fears of the market. The more you educate millennials on the rewards, the more their outlooks will shift from overly negative to neutral or even optimistic about the opportunities investment brings. A balanced outlook is one that understands that the market offers risks as well as rewards.
When millennial clients can look past the risk to see the potential rewards, they will be able to evaluate investment opportunities using their financial literacy skills. When you offer simple online tools and promote micro investments, these investors can wade into the market and make decisions that are in line with their values and goals.