Should robo-advisors save for Millennials?
Due to the fast rise of robo-advisors , there are many options for millennials looking for investing help. However, the saving is the hardest part of accumulating wealth.
Eating out….too much
Those born between 1980 and 2000, the Millennial Generation, tend to spend far more on eating out than previous generations. According to an infographic released by Restaurant Marketing Labs, millennials tend to spend about $174 per month eating out in restaurants. The average for previous generations is only $153 per month.
Even though many Millennials are not working jobs with high incomes, and they still have to think about paying back their student loan debt, millennial households spend an average of $2,639 a year eating out and buying coffee according to a study by The Food Institute. This is 10% more than the Baby Boomer generation. Close to 43% of every dollar a millennial spends on food is spent at restaurants. They tend to eat out even when they are struggling financially. Why are they doing this? They tend to snack more than other generations, and Millennials often do not know how to cook.
Saving, but not investing
Though many millennials do worry about living in a rocky financial situation, they are still not saving enough. The money they do save is not usually invested properly either.
They tend to use banks for checking and savings accounts, but do not take action to invest in areas that could provide them with a better return, said Stefanie O’Connell, the author of “The Broke and Beautiful Life,” a personal finance guide for millennials.
Millennials are scared of the stock market.Only 26% of Americans under 30 are investing in stocks, according to the survey by personal finance site Bankrate.
Even though they may save and invest some, they do not often have a cushion for their expenses, and they certainly are not doing enough to save for a home or a nest egg.
Yeah.Habits Are Changing
As the millennials are starting to get a bit older, many are beginning to change their habits. According to “Encouraging More Visits from Millennials” from the NPD, those who are between 25 and 34 are starting to reduce their restaurant visits.
A survey by Northwestern Mutual found that older Millennials begin to behave more like their grandparents.Savings became a top priority for many millennials
Turn to Robo-Advisors
Some millennials are wisely starting to turn to robo-advisors as a means to help them with their saving. These advisors are personalized savings software that will help the millennials to determine how much they need to have in checking to pay their bills. It will then move the remainder of the money into their savings accounts, or their investments. Some of the options currently available include Digit, Acorns, and Betterment. Each of these robo-advisors contains a number of features.
Betterment has a SmartDeposit feature that allows customers to create a ceiling to determine how much money they want to invest at a time, always providing the investor with an email first, so they have the option of skipping the investment if they choose.
Acorns will gather the spare change from credit card and debit card purchases and then send it to a portfolio of ETFs.
Digit can learn a person’s spending and earning habits and then determine how much money the individual will be able to save without missing it. This is not a bank, and there will not be interest. However, it works well for time-based savings. When you reach the goal, you will receive a gift card or cash bonus.
IncomeClub is working on an Auto-Saving tool that will examine checking account patterns. The client can set a maximum percentage of annual income to save, and the robo-advisor’s algorithm will show them the best way to reach the goal. The tool will also help to point out the client’s bad spending habits.
Robo-Advisors could not only help to invest money efficiently and with low-cost, but solve the hardest part of wealth accumulation- saving money.