¢.R.€.A.M.: THE MONEY ISSUE
The week of April 19, 2015
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Finding financial advice in the age of Google

By Allen Weiner

When I finished graduate school, I embarked on my first job as a newspaper reporter for the princely salary of $18,000.

Saddled with a large student loan debt, I was conned into buying a new car that sent my monthly budget into the bleeding red. Having little or no financial sense, I also picked up a credit card and equipped my apartment with kitchen gadgets and cool stereo equipment.

This familiar story has a familiar ending: Hat in hand, at age 24, I went to my parents to bail me out of a downward spiral of late-payment notices. My father took me aside and casually mentioned he was no better with money at the same age.

Only after this incident in 1978, just one in a long series of major financial disasters, did I come to my senses and begin thinking about the future. Getting married and having a daughter may have had something to do with it, but a near-fatal business bankruptcy in 1989 expedited the process.

The stereotype of today’s millennials is that the 20-somethings lucky enough to find promising careers are bad at managing their money, don’t think about their futures, distrust Wall Street, and are dissatisfied with banks. But more than anything, millennials believe they lack the reliable, truthful, and actionable information needed to address key financial issues.

That prompts the question: Where do millennials turn for financial advice, and is it any easier to find than it was for me 30 years ago?

New challenges

Let’s get one thing straight: The idea that millennials are bad with money is vastly exaggerated.

According to research from banking firm BBVA, 47 percent of millennials have started to save for retirement. Another 43 percent indicate they have a 401(k), and, on top of that, 23 percent said they have an IRA, though there’s growing concern over over the costly, unwieldy infrastructure that goes with saving for your golden years. Likewise, a USA Today/Bank of America survey looking at the spending behavior of those between the ages of 18 and 34, found that many felt they are better off financially than their parents, and 69 percent had savings accounts—albeit many with less than $5,000.

Most likely, the millennial stereotype is based on the fact that 20-somethings expect different financial tools. Marketers often categorize millennials as self-involved, with short attention spans, and demanding information in a customized form that can accessed by a mobile device while multitasking. But those desires aren’t necessarily keeping them from managing their money.

“People complain all the time that our generation was screwed with personal finance and that it should be taught in school. I can only imagine how much more difficult it was to understand this stuff before the Internet.”

“The biggest challenge for millennials is starting off their independent lives carrying tens of thousands of dollars in debt,” Erin Lowry, brand and content manager for the financial literacy website MagnifyMoney.com, told the Kernel.

Of course, there are millennials who are clueless about managing their finances, just like there are those from previous generations who still don’t have their financial lives sorted out. Unlike prior generations, however, many millennials are graduating college with student loan debt, so they’re being forced to figure out finances quickly and at high stakes. (Edvisors reports that the class of 2014 left with more than their diplomas: The average student graduated with $33,000 in student loan debt.)

At the same time, some of today’s millennials could be tomorrow’s millionaires. Financial firm Federated Investors reports that, over the next few decades, $30 trillion in financial and non-financial assets may be passed down to the millennial generation, an estimated 86 million people. This prediction, however, could be more the hope of leading investment firms than a lead pipe cinch.

“Many investors we speak with who are entering retirement say they are not planning to leave money to their children—their kids can have whatever is left over,” T. Rowe Price senior financial planner Judith Ward told the Kernel. “Additionally, considering longer life spans and active retirements, boomers may need their money to last for decades.”

For the kids themselves, figuring out just what to do with their own money is tricky—let alone ensuring that their parents have proper plans in place.

“Eventually, they may want to have ‘the talk’ with their parents—engage their parents in conversations about their parents’ future plans,” Ward added. “What are they planning, have they thought about what might happen should one pass away? Do they have affairs in order? Where are the important documents and contacts? How are they envisioning their retirement and what role do they want the kids to play? Whether or not there is an inheritance, at least everyone can be informed of expectations.”

How should they pick investments, or pick someone to help them pick them? What even is a 401(k) in the first place? Clearly, they’re going to need some help. Just like I did.

Digital financial gurus

My wife and I are followers of talk-show host/financial guru Dave Ramsey.

There’s a regular feature on his show where the host invites people who have slowly clawed their way out of debt to come on the program, talk about their personal savings regimens, and cathartically scream, “I’m debt free!” My wife and I were able to do our debt-free scream at the beginning of this year, largely thanks to following some of the basic rules for financial health that Ramsey lays down in his show on a daily basis.

“We are bombarded with advertising to spend all the time. It’s great to have places that bombard us with messages to save and invest.”

It might be a while before millennials are able to follow suit.

“Millennials are trying to balance many financial priorities: making student loan payments, saving for retirement, saving a down payment for a house and, for older millennials, concerns about funding their own kids’ educations,” Ward said. “Most likely, they are anxious and worried because they do not know where to start. They may not have learned about managing finances at home or school. They are trying to figure it out.”

In doing so, millennials often cobble together their financial understanding from disparate sources: blogs, books, apps, podcasts, newsletters, and TED Talks. Ward said her company’s research revealed that one-third of millennials use financial bloggers as a primary source of financial education. 

While there might not be a readily identifiable authority on the subject of finance for millennials, the resources are out there—if you know where to look. 

Social news site Reddit is one place millennials feel comfortable seeking answers to their financial dilemmas. Questions that filter through the subreddit r/PersonalFinance range from advice on staging payments for numerous overdue accounts to selecting IRAs. Those offering their points of view rely more on life experience and common sense than MBAs and a passing grade on a Series 7 exam. 

“The advantage millennials have is that we are the Google generation,” Reddit user Jpop23mn told the Kernel. “Grandpa trying to convince you to buy whole life insurance? Google it and you’ll know it’s a bad idea in minutes. Don’t know the difference between Roth and traditional IRA? Google it.

“People complain all the time that our generation was screwed with personal finance and that it should be taught in school. I can only imagine how much more difficult it was to understand this stuff before the Internet.”

Beyond Reddit, the Internet offers a bounty of Web and mobile applications that provide financial help for investors of any age, with an emphasis on budgeting for those new to living on a set monthly amount. Two of the more popular apps are Mint and You Need a Budget (YNAB), the latter of which offers a free trial followed by a one-time $60 fee. A digital Dave Ramsey, YNAB’s software allows you to set up a budget and plan for unexpected expenses; it also offers online tutorials to guide you through more of the fine points of personal planning.

By contrast, Mint, an Intuit product, is a fully automated free application that sucks in all of your personal account information, generating a variable budget, personal wealth statements, and investment advice. Mint makes its money by taking a referral fee from its advertisers.

The idea that millennials are bad with money is vastly exaggerated.

There are countless apps for budgeting, including Home Budget ($4.99) and Spendbook ($1.99), most of which apply the garbage-in, garbage-out method. Their value is based on your ability to enter all of your income and expenses on a timely basis. Mint’s automated process is more appealing, but with all of your personal financial data in one place, there’s always a privacy risk, no matter how powerful the company’s security.

“I think a lot of people are intimidated of learning about personal finances because it seems so complex. Of course there are complicated instruments, but I like the advice that if you don’t understand something don’t invest in it or with it,” Jpop23mn added. “Keeping it simple is going to work for most people, especially to get them started. The Reddit wiki gives you the information you need to generate some great wealth for most people by retirement age. You also see some great simple straightforward advice in Dave Ramsey’s baby steps. There is also the professor who has everything you need to know about personal finance on an index card.”

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For Jpop23m and the thousands others who subscribe to Reddit for personal advice, there are inherent, intangible benefits to seeking out financial assistance online.

“We are bombarded with advertising to spend all the time,” he wrote. “[It’s] great to have places that bombard us with messages to save and invest. It feels great too when someone responds, and after a few comments … they decided against making a horrible decision.”

Planning for tomorrow

As with many of life’s necessities, when things get desperate, you can always ask your parents.

When asked in Fidelity’s “Musings on Money” survey who they trust most for information on money matters, 33 percent of millennials pointed to their parents, but 23 percent said they trusted no one. While 59 percent considered their parents good financial role models, a fairly sizeable number did not. In fact, 41 percent disagreed with the statement, “My parents provided a good example of how to have a successful financial future.”

It’s a refrain familiar to many baby boomer parents, myself included. Nearly half of millennial respondents said they don’t get financial advice from their parents, and 27 percent don’t tell their parents anything when it comes to money. 

In a very real way, a lot of millennials are entirely on their own. While that’s not all that different from people in my generation, hopefully the young adults of today won’t have to approach financial catastrophe to figure out how to plan for tomorrow while still prioritizing in the present. There are apps and services out there to assist them, even if they have to sift through more noise to find it. 

In the end, whether you’re Gen X, Y, Z, or a baby boomer born without a silver spoon, the goals are all the same. For me, the notion of putting pennies into your piggy bank was hammered home when I was in grade school. A local bank came by our classroom every week, helping us set up passbook savings accounts. And, of course, we were asked to live by the bank’s slogan: “Wishing won’t do it, savings will.”

That bank went out of business in 1992.

Illustration by J. Longo