Building Good Financial Habits

| April 07, 2023

I was talking with an advisor who works with families that have generational wealth. He said that over his career, he’s noticed that the younger generations of these families have become increasingly concerned about the impact their money has in the world. They want to do good, and they want the businesses and investments they own to reflect their values.

My observation was that this attitude is common among many younger people, regardless of economic status. Discussing millennials, R. Scott Arnell of Geneva Capital said, “This mostly highly educated and culturally diverse group has an investment ethos in which they feel comfortable making money only if, in doing so, some greater social or environmental good aligned with their values is achieved as well.”

Now, a lot of baby boomers might think that’s hogwash. There’s also been a recent backlash against so-called ESG (Environmental, Social, Corporate Governance) investing, with some states passing legislation that in some way or another hinders using ESG criteria for investing.

And you might feel the same way. But you can’t fight city hall: The younger generations are committed to expressing their values financially.

The generations might disagree on the need to do good with their money, but one thing we can all agree on is the need to build good financial habits in today’s younger generations. So it makes sense to encourage millennials and younger generations to be smart with money so that they can do more good later on.

Basic money lessons include:
Use cash, not credit.
But build a credit history for renting apartments and getting more favorable interest rates on loans, for example. Some good practices: Pay student loans and other bills on time, get a credit card and pay it off monthly, and so on.
Commit to financial education by learning the basics of investing.
Create a budget and stick to it.
Build an emergency fund.
Take advantage of an employer’s retirement plan, and if there’s a matching contribution, maximize it.

By forming good financial habits, young adults then have a solid foundation for building wealth. And once they’ve built some savings and are off to a good start preparing for the decades ahead, they can dedicate themselves more fully to supporting causes important to them.

And here’s a positive: According to a survey last year, Millennials (generally those between 26 and 41) might have learned some hard lessons from the Great Recession and pandemic. They’re stressed about paying their bills but are also financially confident and focused on improving their credit scores and reducing debt. A lot of them have started working side hustles since the pandemic started.

So during Thanksgiving when everyone is gathered around the dinner table, stay away from politics and social issues, and pass the financial advice.