7 Financial Planning Tips For Millennials
23 March 2020
Fail to plan. Plan to Fail.
Millennials should create a financial plan to ensure they are assessing immediate personal goals as well as preparing for their long-term financial needs.”
The millennial generation includes everyone born between 1981 and 1996, this puts millennials between the ages of 23 and 38 in 2019. By 2025, millennials will make up 75 per cent of the global workforce, according to the World Economic Forum.
Manulife Singapore has found that one in two millennials, or Gen Y – those between ages 22 and 37 – has started saving for the future, ahead of other generations like the baby boomers (those born between 1946 and 1964) and Gen X (born after the baby boomers but before the 1980s). But its survey also showed that most millennials are likely to splurge their savings on short-term life goals, such as creating an Instagram-worthy home, over saving for retirement.
In its Manulife Investor Sentiment Index carried out in March 2017 – shows a gap between millennials’ expectations of their retired life and the steps they are taking to achieve those financial goals. For instance, 8 out of 10 millennial investors expect their lifestyles to remain the same, but only 5 out of 10 say they are on track to achieve that.
Retirement might seem far away, when in reality you are in the best position to plan for your future during the prime of your life.
Here are some financial planning tips for millenials who are working towards establishing financial security.
1. Start Early
It’s never too early to start planning for retirement. Cultivate the habit of saving as soon as you get your first pay cheque.
2. Save At Least 10% Of Monthly Income
Set aside at least 10% of your monthly income on a recurring basis. You should also set aside at least 3 – 6 months of your monthly expenses as liquid cash savings for contingencies
3. Pay Off Study Loans
Pay off your study loans (if any) as soon as possible as interest that is charged on the borrowed amount will be compounded over time. Allocate a part of your income towards this.
4. Get Health Insurance
Hospitalisation cover such as an Integrated Shield, rider and a critical illness plan is utmost important. Insure your health to protect your wealth. A critical illness (37 people in Singapore are diagnosed with cancer everyday) or an accident may wipe out your hard earned savings, needed for medical treatment. It is best to make sure you have a strong financial safety net to serve both you and your family’s regular needs should the worst do occur.
5. Get Life Insurance
Get yourself covered and hedge against premature death, illness and hospitalisation. It’s better to buy such plans when you are still healthy and insurable. Once your health changes, you will be unable to buy or there might be exclusions or the cover may cost more.
6. Start Investing
Investing options include equities, exchange-traded funds (ETFs) and unit trusts. Investors who prefer to delegate the task to experts can consider investing in unit trusts or ETFs, and track market indexes.
7. Leverage On Compounding
Once your savings and insurance needs are met, any excess funds that may not be required in the short term should ideally be invested for a higher rate of return. Investing early would enable compounding to work to your advantage. When returns and dividends from investments are reinvested regular, over a certain time horizon, the total investment portfolio value will grow substantially.