This post is in collaboration with David M. Allen, a finance and economics writer. Thank you for contributing his insights. All opinions are expressly his own.
Let’s face it: as a generation, millennials are not that great with their finances and certainly not great at saving money.
Sadly, these issues are not due to laziness, as the older generations believe. The savings gap has been widening for the past few years. Largely due to student debt, lack of job opportunities, and a low-growth economy. The financial crisis that left people reeling between 2007 and 2008 can still be felt today, with the younger demographic keenly feeling its after effects. In recent years, however, some millennials have been forging what was then unknown territory: the land of micro-financing.
Micro-financing is exactly what it sounds like: saving money bit by bit until the investor is able to gradually build up sizeable savings. This makes this a decent strategy for those who find themselves living from paycheck to paycheck, which, unfortunately, is what a lot of our generation is doing nowadays.
In true millennial style, a lot of micro-investment options are now offered online, making it much easier for them to get involved. Transactions can be done through mobile devices. A key element of micro-investing today is the presence of the “robo-adviser,” artificial intelligence that automatically builds an online portfolio for you. According to an article on Muckle, debit cards can be linked to micro-investing apps to “sweep away virtual change,” which the app uses to build up an investment portfolio for the user. For example, the 50 cents they get as change from buying a $3.50 coffee will automatically go into their investments. As such, even those who are new to the world of micro-finance can actually enter the realm, because the robo-adviser will require elbow grease by the user in order to do its job.
Unlike other investment options that will require thousands of dollars as the minimum required funds to get started in this, through micro-investing, millennials can practically use the spare change they have in their pockets as capital. What’s more, since they have access to the progress of their investments through a mobile device, they will be able to monitor it to see if it is going in the direction that they need. FXCM advised, mobile trading offers convenience to users. They can also pick up various investment lessons and techniques through these apps to learn more about how to make a good investment, Furthermore, a basic concept in finance is that transparency is the key to making good investments, and millennials will have exactly that in micro-investing, since the information is literally at their fingertips.
Admittedly, a lot of millennials have a devil may care attitude that can translate to poor management of finances. However, here’s a sobering thought: unless they take concrete steps to start saving, they will find themselves locked out of further opportunities, including building a family of their own. Millennials are already the recipient of the after effects of yesteryear’s financial troubles; it wouldn’t do them – or the next generation – any good if they do not take the steps necessary to beat the system.