Forex Articles

Even though savings rates for millennials aren't as high as their counterparts who've been around longer, Generation Y is doing things by its own rules.

For twenty-somethings just starting to save for retirement, robo-advisors — automated online wealth management services — like Betterment and Motif are extremely popular, due in part to the rampant tech-savvy of young investors. There are reasons I use each for millennials, said Brandon Marcott, CFP and founder of Edify Financial Planning.

Others prefer to set up their own investments or rely on advisors they trust.

Read on to see popular options for millennials on how to invest for retirement. (For more, see: Money Habits of the Millennials.)

Marcott said that many of his clients like the service provided by Betterment, a venture-backed Internet startup, because it's known for being easy to use. Millennials want ease, maybe above anything else, he said.

They also like to keep expenses low and not feel that their money is being spent on fees and commissions. There's no minimum investment at Betterment, and it charges a fee of 0.35% of assets per year for accounts of less than $10,000 if clients set up an automatic deposit of at least $100 into their account.

Another reason for Betterment's popularity is that clients can easily see how their investments are doing. Betterment allows savings automation, which is a big draw for millennials who don't want to worry about transferring money to their retirement account every month.

I work with many millennial clients and they like simplicity, transparency and automation; robo-advisors take advantage of all three, said Eric Roberge, CFP and founder of Beyond Your Hammock. (For related reading, see: What Makes Millennial Savers Unique?)

Even though robo-advisors and money management apps are popular with millennials, many still remain wary of investing, said Cristina Guglielmetti, CFP and owner of Future Perfect Planning. "My sense is that they're cautious as a group, and don't necessarily trust the stock market," she said, nodding to how they lived through the Great Recession and grew up watching their parents lose jobs and savings.

This, she said, could be part of the reason why Vanguard has rolled out its personal advisory service — a service that combines an element of human advice with online technology. It could be a draw to millennials. They wouldn't have done that if they didn't think this group would go for it, at least eventually, she said.

The selling point of Motif, which has developed financial products called "motifs" that are similar to the low-cost ETFs offered by other robo-advisors, is its ability to tailor investments based on the investor's values, concerns and morals. One difference between millennials and older investors is that they want to know exactly what kind of company they're investing in. If they care about the environment, they don't want to invest in companies selling gas. If they care about supporting fair-trade employees, they can choose to pursue corporations that support workers in developing countries getting paid a proper wage. (For related reading, see: Robo-Advisors and a Human Touch: Better Together?)

The fact that a client can get a basket of stocks that invest in clean energy companies, or pet friendly companies with one click is amazing, said Marcott.

Millennials want to be responsible, both in their financial planning and to what they believe in.

Sophia Bera, CFP and founder of Gen Y Planning, said that she sees millennials using different income streams to offset the demise of pensions. Creating rental properties and various businesses is one way they're ensuring that they'll have income once they're no longer working.

CFP Tyler Landes, founder of Tandem Financial Guidance, LLC, said that 401(k)s are still king among the millennials he's seen. At the end of the day, millennials' primary means of saving for retirement is still the workplace 401(k), he said. Why? Many don't have proper financial guidance and aren't employing advisors to figure out the best ways to invest. Plus, most millennials don't have extra funds. They're still paying off their student loans, saving for a home or paying for a wedding.

For those that have extra cash flow, [they come to me] with large savings accounts because they're not sure what to do with it, he said. I get phone calls when millennials turn 30 and realize they need some guidance.

Whether you're an advisor who's trying to reach out to prospective millennial clients or a millennial who's interested in different ways to save for retirement, the strategies outlined above may be good options on how to grow and save your earnings. Popular investment methods like these that use elements of robo-advising underscore how technology has made money management easier and more cost-effective — and that's right up a millennial's alley. (For related reading, see: Why Millennials Should Invest in a Roth IRA.)