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The Money Help Gen Y Needs

Kimberly Palmer

The recession hit Gen Y hard: Coming of age during such a financially tumultuous period seems to have led them to invest more conservatively and save more consistently than other generations, as U.S. News recently reported. Parents and financial institutions looking to help guide them in the right direction toward more balanced portfolios and retirement investments might want to take a close look at some of the recent findings from financial firms looking to attract Gen Y clients.

Gen Y, in turns out, is ready for some gentle encouragement to help them balance their portfolios and ramp up their savings; they are interested in managing their own finances partly because they often watched their parents struggle in a tough economy. Here are seven strategies for anyone looking to help Gen Y with their money:

Gen Y likes getting advice online.

A survey of 1,000 adults last fall by TIAA-CREF found that members of Gen Y are more likely to enjoy talking with financial advisors online and attending webinars compared with other generations. They also like custom financial advice that applies specifically to their own situation, including interactive tools and calculators. That means financial institutions might want to consider creating those custom tools for their younger clients.

Apps can help.

Since Gen Yers are seldom without their phones, apps can be a useful way to impart financial information to them. That's one reason SigFig, which helps people fix and manage their portfolios through both an app and online software platform, has been so popular among millennials. CEO Mike Sha notes that the SigFig program often finds that Gen Y customers have invested too conservatively and helps them shift into a more age-appropriate portfolio. TIAA-CREF also released a Savings Simplifier iPhone app that lets users track their investments and pick up related tips.

Gen Yers still turn to their parents.

Linda Boyd, senior branch officer manager for Scottrade, points out that as a group, Gen Y tends to stay home longer than previous generations, which allows them to put off big expenses as they find their own financial standing. "When you're living with parents, you don't have to pay for things like food or rent, and you have more disposable income," she says. That time together also gives parents a chance to remind their grown children to open retirement accounts and start investing.

They need to be encouraged to take risks.

Because Gen Y has such a tendency to invest conservatively after seeing the market plunge during the Great Recession, the older adults in their lives can gently encourage them to take more risks. "Putting a large chunk of assets in a portfolio with such low-yielding safe investing isn't going to meet your long-term objectives," says John Diehl, senior vice president at Hartford Funds.

They also enjoy hearing about the basics, like saving.

A recent UBS Investor Watch report shows that most millennials say "saving" was the best financial advice they ever received. Other generations were more likely to mention "investing." When asked how one achieved financial success, millennials were also more likely to say "saving" and "living frugally" than other generations, who were more likely to cite long-term investing.

Diversification is another much-needed lesson.

"Picking a range of equity income classes with different types of investments and contributing in a disciplined manner, so if they market goes down, you can buy more shares, is an healthy overall strategy," Diehl adds.

Well-intentioned grown-ups should stick with the facts.

"No one starts out knowing how to invest. It's all learning, and this generation wants facts and details, not hype," Diehl says. Gen Y saw firsthand how their parents' generation got hurt by the subprime mortgage crisis and investing scams, which is one reason they are so interested in a do-it-yourself approach. Even if they enlist the help of a financial advisor, they often still want to be involved in knowing just where their money is going and why.

Those are useful takeaways for the older adults who want to help the Gen Yers in their lives.

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