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How to Help Young Adults Start Saving and Investing

February 9th, 2024 | 3 min. read

By Advance Capital Team

As parents and grandparents, one of the most valuable legacies you can pass on to your children and grandchildren isn’t just a sum of money, but the knowledge and habits that can help them build a secure financial future.

And, it could be a legacy that keeps on giving. In fact, researchers Thomas Stanley and William Danko, who wrote The Millionaire Next Door, found that one common trait among wealthy Americans was that “their adult children are economically self-sufficient.”

Starting to save and invest wisely at a young age can set them on a path to financial independence, allowing them to achieve their dreams – whether that’s buying a home, traveling the world or enjoying a comfortable retirement.

Below are five steps to help your adult children begin building their nest egg.

This article covers the following:

  • Have an open conversation about finances
  • Emphasize the importance of budgeting and saving
  • Discuss the basics of investing
  • Invite them to a meeting with your financial adviser
  • Offer guidance for their retirement or investment accounts
  1. Have an open conversation about finances

A great place to start is to simply open a dialogue about finances. Most states don’t require financial literacy courses in high school. So, many young people find the world of finance intimidating or may not realize the importance of starting early.

Begin by sharing your own experiences and the lessons you’ve learned about money management. Discuss the power of compound interest and how saving and investing can grow over time. Encourage them to set financial goals and to think about what they want their financial future to look like.

  1. Emphasize the importance of budgeting and saving

Before diving too deep into investing, young adults need to understand the fundamentals of budgeting and saving. Help them create a budget that outlines their income, expenses and savings. You can introduce them to various budgeting apps or tools that can make tracking their finances easier and more interactive.

Most importantly, stress the importance of living within their means and setting aside a portion of their income for savings each month.

  1. Discuss the basics of investing

Explain different types of investments, such as stocks, bonds, and mutual funds, and the potential risks and rewards associated with each. Discuss the importance of diversification and having a long-term perspective when investing.

It’s also crucial to educate them on the difference between investing and speculative trading, emphasizing the value of steady, disciplined investment strategies over chasing quick profits. A great resource is this article on The Benefits of Long-Term Investing.

  1. Offer guidance for their retirement or investment accounts

Many young adults may not fully understand how to optimize these accounts, such as an employer-sponsored 401(k), for long-term growth. So, consider offering guidance on the benefits of maximizing employer matches, the importance of choosing the right investment mix, and the advantages of early and consistent contributions.

You may also want to introduce them to ACM 401K BUILDER, our professional account management service designed to assist individuals in navigating the complexities of company retirement accounts. ACM 401K BUILDER can help them manage their 401(k), making sure that their investment choices are aligned with their long-term financial goals. This service can be particularly appealing to young adults looking to make informed decisions with their retirement savings but may feel overwhelmed by the options and strategies available.

  1. Invite them to a meeting with your financial adviser

A special step that could help your child or grandchild on their own investment journey is to invite them to a meeting with your financial adviser. It’s an opportunity for them to ask questions and learn from an experienced professional about the nuances of financial planning, investing strategies and retirement planning.

Your adviser can offer tailored advice based on their individual financial situation and goals. This experience can demystify the financial planning process and encourage them to take proactive steps toward building their nest egg.

Bottom line

Helping your adult children or grandchildren save and invest early in life is one of the most impactful legacies you can leave. By educating them on the basics of financial management, introducing them to the world of investing, and supporting them as they take their first steps, you’re not just helping them build a nest egg; you're equipping them with the knowledge and skills to navigate their financial future confidently.

Remember, the goal is to empower them to make informed financial decisions that will serve them throughout their lives, ensuring a legacy of financial literacy and independence that can be passed down through generations.

Advance Capital Team

Advance Capital Management is a fee-only RIA serving clients across the country. The Advance Capital Team includes financial advisers, investment managers, client service professionals and more -- all dedicated to helping people pursue their financial goals.