Adding insult to injury, many have delayed contributing to long-term investments due to job insecurities. What's more, they are taking care of their children, their aging parents, paying off their student debt, their children's student debt ... So, economically, they're having a very stressful life.
Sounds like an audience best left alone. Yet that is exactly what financial advisors cannot afford to do.
Whether they recognize it or not, Generation X desperately needs to get back on track. How can financial advisors help? The answer is: Educate them.
According to a Merrill Lynch behavioral finance study, younger generations have a fairly pervasive misunderstanding of the power of investing. In particular, the power of compounding interest.
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When college students were asked to estimate the total value of a small monthly investment earning 5 percent or 10 percent over 40 years, they skeptically underestimated by anywhere from 60 percent to 800 percent.
It's no wonder many Gen Xers don't see the value in investing small amounts for tomorrow, when finding that small amount already feels like a sacrifice today. A savvy financial advisor will approach the tentative investor with a combination of optimism and caution. Here are six simple ways to encourage risk-averse Gen Xers to explore the world of investing.