Where college-age millennials once leaned on parents for everything from spending cash to laundry help, they’ve graduated to a new facet of dependence that’s just coming out in the wash: financial advice.
Two new surveys, one by Fidelity Investments and the other by TIAA-CREF, both released this fall, reveal that millennials seek out their parents more than anyone else for financial guidance. In Fidelity’s “Millennial Money Study,” which surveyed 152 adults ages 25 to 34, 33 percent of millennials identified parents as their top choice for trusted money advice.
In TIAA-CREF’s “Gen Y Advice Matters Survey,” which included 1,000 adults age 18 and older, nearly half of respondents (47 percent) said parents are especially influential in the financial counseling process. They’re also more likely to be involved than employers (45 percent).
As for whether this is a good idea, financial industry professionals say young adults should explore other options to get their financial lives on track.
“Of course, there’s a difference between receiving [parental] advice and relying solely on the advice given,” says Kristen Robinson, senior vice president of Fidelity Investments’ women and young investors’ products. “Gen Y should listen to what parents have to say. But at the end of the day, financial decisions are personal matters and best made after carefully considering a number of factors and doing research.”
As a tech-savvy lot, Generation Y is likely to explore online and social media platforms. However, they may have trouble knowing where to start their search, or whom to believe. Almost one in four millennials in Fidelity’s study indicated they trust “no one” when it comes to money advice.
To overcome that guardedness, financial advisors, plan sponsors and employers need to “engage with Gen Y and speak their language when it comes to financial topics,” says Kathie Andrade, head of individual advisory services at TIAA-CREF. “It’s important for millennials to access financial advice via multiple platforms.”
Financial professionals also need to understand the diverse set of needs millennials have, says Joseph Jennings, wealth director at PNC Wealth Management.
“Many folks in that age range haven’t been in their first job too long, have student debt they’re trying to pay off or want to save for a house and retirement,” Jennings says. “They have a lot of competing interests and need someone who can provide a holistic view of their financial picture and help them balance their needs.”
The best way parents can help is to direct their children to ethical professionals. “If the parents have a relationship with someone they trust, that always helps,” Jennings says.
Meanwhile, relying solely on mom and dad clearly represents a double-edged sword: Both reports suggest many Gen Y progeny will learn more about what not to do than anything else. TIAA-CREF found, for example, only 57 percent of those ages 55 to 64 feel optimistic about their finances, and thus may encourage their children to take a different course.
“With almost 30 years investment experience, I can say with complete confidence that many baby boomers, the parents of Gen Yers, are in a financial mess,” says Mark Grimaldi, co-author of “The Money Compass: Where Your Money Went and How to Get It Back.” “As I like to say, never take advice from someone less successful than you are.”
Where, then, can millennials go for solid investment and financial help? Here are some resources they can use, with or without the blessing of their folks:
— Free online advice: TIAA-CREF and Fidelity both have sites geared toward millennials (Starting Your Financial Life and MyMoney, respectively). TIAA-CREF’s portal features a video outlining “great investments for young people,” and MyMoney covers investment topics such as exchange-traded funds, mutual funds and stocks.
— Investment apps: Available for iOS and Android, Acorns works via a simple system: Your “spare change” from linked credit and debit card purchases is rounded up to the nearest dollar and invested in six different funds based on your risk tolerance. It’s targeted toward young investors who are wary of brokerage houses or may have limited resources. Other quality apps include Shares 2 for iPhone, which tracks stock trades and overall gains in the market with a focus on those new to investing.
— Robo-advisors: Founded by millennial Jonathan Stein, Betterment.com, a robo-advisor site, follows a straightforward path where you enter your age and one of five general investment goals (i.e. “build wealth” and “safety net”). It then invests the money for you in a combination of stocks and bonds. Fees range between 0.15 and 0.35 percent of your annual balance, and the Betterment app (iOS, Android) uses concise screenshots to show overall account balances and performance. Other popular robo-advisors include Wealthfront and ReBalanceIRA, which both earned top scores for transparency from Jack Waymire at Paladin Registry, an education website for investors.
— Industry organizations: Websites for the Certified Financial Planner Board of Standards and Financial Planning Association are authoritative sources for investment pointers and can help you find an accredited financial expert in your area, says Amy Podzius, director of TIAA-CREF’s field consulting group.
— The U.S. News Advisor Finder: This searchable online directly profiles hundreds of thousands of financial advisors. Users can find advisors and firms by state, name or ZIP code.
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Millennials: Stop Taking Financial Advice From Mom and Dad originally appeared on usnews.com