Millennials and money: Local professionals talk latest trends

Brock M. Alspaugh, founder and financial advisor with Innovative Financial Solutions in Cape Girardeau; Kayli Naramore, market business manager at First State Community Bank in Cape Girardeau; and Stephen Schott, realtor with Ritter Real Estate.

There are many labels pinned to the age group of today’s 25- to 40-year-olds — the infamous generation known as “millennials.” Broke, indebted and living off their parents, this “lost generation” gets a bad rap for being financially unstable. But for those in this age group who are planning for the future, investing may look a bit different from previous generations.

Millennials have grown up in a different economic climate than generations prior. While it is true that financial decisions such as buying a home, investing and saving may look different for them, that’s not to say they aren’t making moves to set themselves up for the future.

While traditional avenues of investing are still available, younger generations are exploring different areas to put their money. Apps like Acorns, Invstr and Robinhood are becoming popular among millennials who prefer to set their investment portfolio based on their specific lifestyle and needs.

The ability to link a bank account that invests “round-ups” from other purchases or set aside small amounts on a weekly basis may seem less intimidating for a young investor. These apps also allow the investor to watch their money grow in a real-time, tech-based environment and adjust their portfolio with the tap of a finger as their financial situation changes.

While these apps can be less intimidating to a young investor, Brock M. Alspaugh, founder and financial advisor with Innovative Financial Solutions in Cape Girardeau, indicates that these apps cannot address all the complexities that go into developing a comprehensive retirement plan.

“People who I work with are looking for professional advice,” Alspaugh said, “which I believe is always the best option.”

In addition to these online investment apps, the rise of app-based banking has affected the financial landscape. Local banks, now competing with a range of online options, are finding their own opportunities to appeal to this segment of the market.

Kayli Naramore, market business manager at First State Community Bank in Cape Girardeau, notes that while their data indicates most millennials have some sort of traditional savings account, “they are also keeping money in places [like CashApp, Facebook Pay, Venmo, PayPal] where they can more easily access funds for online purchases, transfers, etc.”

According to Naramore, the need for person-to-person interaction has become minimal within this generation. With this shift, brick-and-mortar banks have seen the decline of younger customers walking into their banks and have jumped on board the app-train.

First State Community Bank has developed a money-share tool called Person to Person (P2P) where their customers are able to send money directly from their account to anyone outside of the bank’s network.

“It’s hard to get young clients to work with us at the bank,” Naramore said. “That generation doesn’t need the social interaction. They’d rather quickly do their transactions without having to actually talk to a human.”

Stocks and savings accounts are not the only places millennials are funneling their money. According to businessinsider.com, 45% of millennials have a retirement savings account such as a 401(k) or IRA and 33% are actively contributing to it.

“The general rule is you should save 10-15% of your paycheck towards retirement,” Alspaugh said. “The traditional 401K uses pre-tax dollars which helps you now on your taxes. The Roth version uses after tax money but can be tax-free in retirement, including growth. My advice is to talk to your accountant and financial advisor to determine the best option for you.”

Retirement planning has changed drastically over time and continues to evolve as our economic climate does.

Years ago, CDs would generate double digit interest rates. Today, a short-term CD offers less than 1% APY with three- and five-year options not doing much better.

“Baby Boomers had a large majority of their funds tied up in savings bonds, CDs and stocks,” Naramore said. “The return on these were high, so closer to retirement they could move funds to high-interest CDs and live off the interest to allow their stocks to continue growing.”

In today’s world, the return on investment is simply not the same. And it’s leading younger investors to experiment with new ways to grow their money.

Stephen Schott, 28, is a realtor with Ritter Real Estate and began his investing career over 10 years ago when he purchased his first investment property.

“The biggest mistake I see from most people is they never pull the trigger and start investing,” Schott said. “They are either too scared, not motivated enough, or don’t have a goal in mind with their money. To make an investment work, whether it’s real estate, crypto or the market, you have to be financially disciplined.”

Today’s investment market offers many diverse ways to grow money, rather than the more standard investment strategies used by previous generations. When it comes to making the decision, Schott said that the first step is getting educated on the topic.

“The most important thing [about millennials and money management] is that we were never taught about money in school,” Schott said. “We aren’t taught how to handle it, or even what money really is.”

He suggested the only education millennials are offered comes from their parents, who learned from their parents. And the generational gaps — and in some cases misinformation — can hinder the confidence in making investment decisions.

Rather than turning to professional advisors, many millennials look to the internet or podcasts to help. It just takes starting to explore and asking questions.