Saving for retirement has always been a challenge, but it’s harder than ever for many Americans today. One in three people have no retirement savings at all, and more than half of all adults have saved $10,000 or less.

When it comes to millennials, however, the news is more mixed. According to the same GoBankingRates survey,42 percent of millennials have no retirement savings. Yet those who do save are socking away a higher share of their income – about 7.5 percent compared to just 5.8 percent in 2013. Still, many millennials simply aren’t building the savings they’ll need in their later years.

AFC® professionals are uniquely positioned to help change that trend, and it begins by educating young clients on several key points they’ll need to understand in order to save successfully.

The Value of Time

One of the greatest assets for millennials is also one of the greatest challenges: time. The ability to start small and build savings over several decades is tremendously advantageous, but many young people find it difficult to save as much as they should when they know they likely won’t be retiring for many years. Reframing this problem is one of the most important tasks a financial counselor can accomplish. Rather than being seen as a convenient excuse to put off retirement planning, young people should be guided toward the view that time is just as valuable as money when it comes to saving.

Planning for Success

Many millennials begin saving by simply stashing money haphazardly in the hope that it will someday pay off. While saving is never a bad thing in any form, young clients should always be encouraged to develop a set plan and to stick to it as closely as possible. Of course, this begins by setting realistic goals for both the client’s retirement age and the total savings they’ll need to make it happen. Whenever possible, young people should begin with their savings goals and create a budget to fit rather than the opposite.

The Many Paths to a Successful Retirement

One of the most appealing and least understood aspects of retirement planning is that it can be done in any number of different ways. Though millennials who have access to employer-sponsored retirement funds often take advantage of them, far fewer young people utilize options such as Roth IRAs, ETFs and mutual funds.

Even fewer understand the value of a health savings account, which can often make the difference between a minor inconvenience and a complete financial disaster in the event of a major medical issue. Millennials who are aware of the savings options available to them, and of the advantages and drawbacks inherent to each, tend to be far better prepared than those who don’t.

Mastering Credit and Debt

Both credit and debt have become dirty words in recent years, but millennials shouldn’t be afraid of them. They should, however, understand how to utilize them correctly. Using a credit card for routine purchases or taking out the occasional small loan can be a great way to build credit, but many young people fail to recognize the risk that larger debts pose to their ability to save for retirement. Ever-increasing student loan debt already pushes back saving for many millennials, but high-interest debts like multiple credit cards can make it nearly impossible to put aside adequate savings each month. Many people are also unaware of the assortment of federal programs that can aid in managing, reducing or even eliminating student loan debts, making this a key area to explore for those whose income is being burned away on interest and other fees.

Though surveys have shown that most millennials are optimistic about their eventual retirement, reality doesn’t always justify such a rosy outlook. Millennials simply aren’t saving enough as a group, but there’s still time for that to change. Even modest savings, if started early enough, can grow to eventually form the basis of a comfortable retirement. For that reason, the ability of skilled financial counseling professionals to guide young clients toward an effective, sustainable retirement plan is perhaps more important now than ever.

Guest Contributor: Maricel Tabalba

Maricel Tabalba is a freelance contributor for who is interested in writing about personal finance advice for Millennials and college students. She earned her Bachelor of Arts in English with a minor in Communication from the University of Illinois at Chicago.

January 27, 2017

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