- Certain life events can have a major impact on a client’s financial future.
- Younger clients can feel overwhelmed when faced with financial decisions they need to make now or in the near future.
- Encourage smart financial habits to help reduce youthful money mistakes.
Life is full of important events. And each one brings with it a series of financial decisions that can affect your clients’ finances for years — or even decades — to come.
For clients just starting out in their 20s and 30s, it can all seem a bit overwhelming at times. That’s where you come in. Here are a few key life events to watch for in your younger clients’ lives (or older clients’ kids’ lives) where they are likely to be faced with major financial decisions and could certainly use your guidance.
Their first job
They worked hard in school and now they’re ready to put those new skills to good use. Now is the time to start firming up their financial knowledge. They may be making more than they ever have before, but they probably also have more responsibilities than they’ve ever had before, too. Get them started off on the right foot by coaching them on:
- Looking beyond just salary and examining an employer’s total benefits package, including health care, retirement plan, commuting costs, vacation days, etc. One job may pay more, but cost them more in the long run.
- Considering paying down their highest interest loans first if they have debt.
- Making sure they’re signed up for their employer’s retirement plan and encourage them to contribute at least enough to get the full match from their employer.
- Saving for a rainy day. Remind them to take care of their future self by saving at least three months of living expenses.
- Building up their credit score by paying bills on time to help create the life they want to live.
Few things can affect your clients’ financial lives more than tying the knot. And while finances aren’t the most romantic topic surrounding the subject of marriage, they are a necessary conversation to help preserve the “happily ever after” part. Here are some other money matters to get your younger clients thinking about when they’re finally ready to walk down the aisle:
- Review life and disability insurance coverage to ensure they have enough for their new life together.
- Revisit the beneficiaries on their life insurance policies and retirement accounts to make sure they’ve added their new spouse.
- Talk to them about creating/updating a will to insure their final wishes are known.
- Discuss their short- and long-term financial plans so you can understand their mutual goals.
- Encourage them to max out their 401(k) contributions.
Buying a home
Obviously, something as major as purchasing a home can have an enormous effect on any client’s finances — especially younger ones. Counsel them on the associated costs of owning a home, such as property taxes, loan interest, home insurance, HOA fees, closing costs, utilities, maintenance, etc. Talk to them about:
- Buying a home they can actually afford versus how much they qualify for.
- Life insurance coverage to be sure a surviving spouse could pay off their mortgage and maintain their quality of life should the worst happen.
- Disability insurance so clients can continue making mortgage payments in the event they are unable to work.
- Saving up for a down payment and why they shouldn’t raid their retirement funds.
- How much to keep in savings for surprise home repairs and ongoing maintenance costs.
Having or adopting children
It’s no secret: Kids aren’t cheap. According to the U.S. Department of Agriculture’s most recent numbers, it’s estimated that for a child born in 2015, a middle-income married-couple family will spend $233,610 from birth through age 17 on child-rearing expenses.1 But with some careful planning, good budgeting, and guidance from you, at least their finances will be one less thing keeping them up at night. Talk with your clients about:
- Whether both of them will work or if one becomes a stay-at-home parent.
- If they haven’t already, recommend creating a will to designate who will raise the child(ren) and handle finances if they’re not around.
- Getting a dependent care flexible spending account (FSA) to use on day care, if offered by their employer.
- Starting a 529 plan or other educational savings accounts right away (if possible).
- Making sure there’s enough life insurance to help raise their child(ren) in the unlikely event one or both parents are no longer around.
- Double checking that their beneficiary information is up to date.
- The benefits of purchasing a life insurance policy for each child.
Become a trusted financial resource
Younger clients just starting out in life may not have a lot of money, but they still have financial and protection needs. They may not offer a big commission now, but you can become a trusted financial resource for them. Remember, they are your clients of the future. As their experience, earning potential, and income increases, you’re likely to be their go-to financial expert as they seek more investment and retirement solutions.
1 “Families Projected to Spend an Average of $233,610 Raising a Child Born in 2015,” U.S. Department of Agriculture, 2017
Transamerica Resources, Inc. is an Aegon company and is affiliated with various companies which include, but are not limited to, insurance companies and broker-dealers. Transamerica Resources, Inc. does not offer insurance products or securities. The information provided is for educational purposes only and should not be construed as insurance, securities, tax, legal, or financial advice or guidance. Please consult your personal independent advisors for answers to your specific questions.
Neither Transamerica nor its agents or representatives may provide medical, tax, investment, or legal advice. Anyone to whom this material is promoted, marketed, or recommended should consult with and rely on their own independent tax and legal advisors and financial professional regarding their particular situation and the concepts presented herein.