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The Best Financial Strategies for 20-Somethings

By WTOP Staff

Millennials are growing up: The oldest of the cohort are approaching their mid-30s, which often coincides with more adult financial responsibilities, including mortgage payments and family-related costs. They have more grown-up challenges, too, like paying off debt and saving for retirement and future college tuition payments for children.

The good news is that the financial services industry wants to help. Eager for younger customers’ business, the financial industry has been busy analyzing millennials’ money challenges and trying to figure out how they can best reach out to them. As a result, a handful of financial services companies recently released money tips for millennials. Here are five of the best ones:

Save like it’s 2009. Savings rates tend to go up during recessions, which is why personal savings rates shot up in 2009. The fear of financial instability appears to motivate people to squirrel more money into the safety of bank accounts rather than squander it on new shoes or a new smartphone. Millennials could use some of that motivation, since many have yet to start padding their bank accounts or saving for retirement.

A 2014 Wells Fargo Millennial Study of 1,639 millennials found that 55 percent said they have already started saving for retirement, and those who haven’t yet say they think they will begin at age 35. Women millennials were particularly behind the savings game, with millennial men having accumulated almost twice as much as their female peers.

Four out of 10 millennials in the survey said debt was their top concern, with about half reporting 50 percent or more of their income goes toward paying off their debt. In addition, 56 percent said they are living paycheck to paycheck and simply don’t have the money to start saving for retirement or other goals. ( Financial advisors generally recommend saving between 10 and 20 percent of your income over your working years, with the goal of replacing 80 percent of your income during retirement.)

Karen Wimbish, director of retail retirement at Wells Fargo, urges millennials to get started with saving as soon as possible in order to benefit from compounding interest. Having more money in the bank, she says, can also provide a confidence boost when it comes to achieving long-term goals. She notes that many millennials are aware of the fact that they should start saving as soon as possible, but they still find it hard to do so.

Get over your fear of the market. Given that millennials came of age in the era of Bernie Madoff and the subprime mortgage crisis, it’s no surprise that many studies suggest they don’t trust the market and resist investing in it. The problem with that conservative approach is that it could hurt them in the long run, if they aren’t investing their money aggressively enough to grow over time.

Confront loan stress. Student loans are a huge source of worry for millennials. Respondents in the Wells Fargo study cited it as one of the biggest drains on their income: Credit card debt claimed 16 percent of their paychecks, then mortgage debt with 15 percent and student loan debt with 12 percent. (Auto loans claimed 9 percent and medical debt took 5 percent.)

Chat about money on dates. OK, maybe not the first date, but USAA financial planners suggest talking about money, and credit histories in particular, with long-term mates. USAA urges millennials to ask their partners how much debt they have, as well as get an overview of assets before exchanging vows. The reason? A bad credit score can derail post-marriage plans, from buying a house to purchasing a new car.

Get a job, not a degree. Obtaining advanced degrees can make sense in a lot of situations, but USAA financial planners also warn against using school as a back-up option when the job market doesn’t work out. Returning to school often means building up more debt, and if the degree isn’t directly related to your future career, it might not pay off in the long run.

If you’re a millennial (or the parent of one), don’t let all these financial burdens get you down too much. Millennials might have a lot on their financial plates, but they also have a lot of financial potential.

More from U.S. News

How to Manage Your Money in Your 20s

7 Tips to Help Millennials Save for Retirement

10 Things Everyone Should Know About Money

The Best Financial Strategies for 20-Somethings originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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