How Financial Advisors Can Assist Generation Z

August 9, 2023

Presented by Rich LeBranti

Gen Z includes anyone born between 1997 and 2012. Described as the most diverse generation, Gen Z grew up with technology that previous generations did not. Although Gen Z is notable for using their devices and social media excessively, they are tech-savvy, ambitious, and eager to excel in the workplace. Subsequently, it is essential for Gen Z to learn the fundamentals of financial literacy. Money is a huge factor that shapes society making it crucial for the next wave of workers to understand these concepts. Financial advisors manage their client’s money and give advice to them so that they can be financially successful. Many think that only middle-aged people with a lot of money have financial advisors, however, anyone can connect with an advisor. In reality, the sooner one learns financial literacy and gets their finances managed the better off they will be. Here are some ways a young person can get help from an advisor:

Saving and Investing Early

Two of the most crucial habits of successful people are saving and investing. The earlier one is educated on saving and investing the better. These concepts are different, but both are equally significant to learn about. Saving allows people to be financially stable not just in the present, but in the future. Many young people save money for short-term goals such as traveling, buying a car, or starting a business. Financial advisors can assist young people in saving for retirement and other long-term goals too, such as buying a house or a vehicle. Investing provides the opportunity to grow one’s money by placing it in stocks, mutual funds, ETFs, bonds and real estate. Since investing is a very time-dependent concept, it is important to start investing at a young age since young people have more time. Financial advisors can provide guidance on investing and help people build a stock portfolio that is appropriate for their risk tolerance and investment goals.

Creating a Budget Early

A budget balances expenses with income and future goals. Financial advisors can help young people to create a budget and stick to it, which is essential for building wealth over time. Having a budget assists people in tracking their spending and saving to avoid debt. Some young people may not think that it is a necessity to start budgeting in their adolescent years however, budgeting develops important financial habits that are beneficial later in their adult life. It is wise to create a budget plan for college spending. A college budget plan would include income from a job, fixed expenses such as insurance and tuition, and flexible expenses such as clothing, transportation, and utilities. Advisors can give their clients smart spending strategies such as keeping track of where their money goes and saving and reviewing receipts.

Buying vs. Renting?

There is no correct conclusion as to whether buying or renting a home is better. One option may fit one’s needs more effectively than the other. Some people see buying as the better option because it tends to be more stable and long-term. Also, buying helps build equity for the homeowner, while renting builds up the equity and net worth of the landlord rather than the renter. Home equity is the market value of a home without any mortgages or debts on the property. Over time, due to home appreciation, the value of a home may increase resulting in profit if a house is sold. However, renting may be more beneficial to people that are on the go and looking for short-term living arrangements. Renting tends to be more flexible with more predictable expenses. Additionally, with renting, people will generally not have to handle repairs, property taxes, homeowners insurance, and other expenses that come with home ownership. It can be difficult to decide which living arrangement is best for an individual. A financial advisor can help distinguish the pros and cons of buying vs. renting based on your lifestyle and goals.

Paying Off Student Loan Debt

Many students decide to get loans to cover the cost of their education. Students typically use loans to pay for tuition, textbooks, housing, transportation, meal plans, and anything else regarding schooling. Students can get loans privately or from federal lenders. Many advisors would say that federal loans are better since they tend to be more flexible and the interest rates that come with the loans are lower. Students can go online, call banks and talk to their financial aid office to see what the current consolidation options are to find lower interest rate options. Also, many professions have employers that offer loan forgiveness plans where a student can have their loans fully or partially forgiven if they agree to work in the public sector for a certain period of time. After graduation, students who applied for loans will be given a window of time that they are required to pay the money that they owe. Thus, having a financial advisor is beneficial for students because they can give them advice about what to consider when getting a loan and can offer support and advice on repayment.

Managing Debt and Improving Credit Scores

There are many kinds of debt including student loan debt, credit card debt, car finance debt, mortgages, etc. Some debts like mortgages usually have low interest rates while others such as credit card debt can have high interest rates. Unlike credit cards, mortgage interest is a tax reduction on most people’s tax returns. It is a misconception that debt is always a bad thing. If the debt is being used to improve one’s situation it can be good. Debt becomes an issue when someone is unable to pay the money back that they owe. It can lead to a bad credit score when money is owed on credit cards and when bills are paid late or not at all. Financial advisors can compose a plan to manage debt. Advisors can analyze bank statements, tax returns, and credit card bills to remove any unnecessary expenses. Next, the advisor can give advice on consolidating the debt. A credit score is a number from 300-850 that represents the probability that someone will pay bills on time. It shows how people have handled their money and debt. A bad credit score can make getting loans difficult and could cost the borrower more since there is more risk.

Understanding the Importance of Dollar-Cost Averaging

Dollar-cost averaging is a strategy to manage price risk when buying mutual funds, exchange-traded funds, or stocks. The desired amount that one invests is divided into small, equal increments with the hope that the average price will decrease for better returns. By investing the same amount of money at regular intervals, one can potentially increase returns over time with lower risk. Another benefit of cost-dollar averaging is that it can help avoid investing at a bad time, despite the fluctuation of the market. Young investors that are starting to invest and have smaller amounts of money should consider dollar-cost averaging.

Ultimately, it is valuable for people of any age to connect with a financial advisor who can guide them on their journey so that they can reach their financial goals. Financial advisors are professionals who can offer the best advice to their clients. It is essential for parents to get their kids familiar with these concepts so that they pick up good habits that will prepare them for a successful financial future. With discipline, sacrifice, budgeting, and proper planning a successful financial plan is within anyone’s reach.

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