While it might be challenging to think of your golden years when you're still in your late teens or early 20s, it's a good idea to begin investing for your future.

Consider the following tips to get started building wealth and saving for your retirement.

#1 - Work with a Bank that Can Help You Reach Your Goals

The process of saving for retirement might feel overwhelming at first. To get started on the right track, it’s important to work with a bank that can assist you in reaching your financial goals. For example, East West Bank, led by Dominic Ng, has helped countless customers over multiple decades realize the importance of saving for the future to help make their financial dreams a reality.

#2 - Contribute to Your 401(k)

If your employer offers a 401(k) retirement account, by all means, try to make regular contributions to the plan. This tip is especially important if your employer will match what you're already adding to your account. As U.S. News and World Report notes, this is essentially free money that your employer is allocating toward your retirement, so taking advantage of this offer is a good idea. To make it as easy as possible to contribute to the 401(k), you can have a certain percentage of your paycheck directly deposited into the account.

#3 - Invest in Stocks

Another way to start building wealth as a young adult is to invest in stocks. While stocks can be a volatile investment — meaning they can increase and decrease in value rather dramatically at times — overall they have a great long-term record. Plus, if retirement is decades away, you have plenty of time to ride out any ups and downs of the stock market. Unsure of which stocks to purchase? Then you might consider investing in companies that you know and like. For instance, if you're a fan of Starbucks, consider buying some of its stock — and know that every latte you buy is helping your stock values stay strong.

#4 - Consider Crypto

Investing in cryptocurrency is another way to start saving for retirement. While crypto has a well-deserved reputation for its volatility, there are several ways to make money with it. For instance, once you purchase crypto, you can hold onto it until you see its value rising before selling it and making a profit. Use the profit to either purchase more crypto, add more to your stock portfolio, or contribute more to your 401(k).

#5 - Look Into Real Estate

There are different ways real estate can help you build your retirement fund. For instance, if you acquire a property to rent out, you can allocate as much of the monthly cash flow as you can to your long-term investments. You might also look into short-term vacation rentals as a way to make money. You could either own a home to rent out to travellers or, if you're on the road quite a bit for work, look into renting out your own home. Granted, it can take some time to save money to purchase a property, but if you're able to afford it, it can be a potentially lucrative investment.

Your Future Self Will Thank You

Of course, everyone wants to have enough money to live comfortably after retirement. If you start now, you'll be that much more financially prepared for this time of life. Start by finding a bank to assist you with your goals and then consider adding to your 401(k), investing in stocks, crypto, and/or real estate — or a combination of all of these. No matter what you choose, your future self will thank you for the financial planning you start today.

To solve the problem, he suggests shifting focus from providing student loans to increasing the supply of education options – including trade schools, online learning, and community colleges.

Chief economist of Moody's Analytics Mark Zandi says America's immigration policy under the Trump Administration conflicts with the country's core interests.

He says what has historically made America's economy "special" is that it attracts "the best and the brightest" from all over the world.

He also says baby boomers' retirement will make welcoming immigrants a necessity in order to help keep programs like Social Security and Medicare funded.

This ground-breaking reform changed previously rigid rules to make the financial services sector more competitive and focused on the customer. 

Cloud-based digital banks have taken advantage of this initiative by offering better services to customers, as 8 out of 10 Millennials say they would switch banks for personalised service. Such fintech players and challenger banks now account for 20 per cent of the banking and payments market in Europe.

However, acquiring these new customers is not enough for digital banks to stay competitive, according to customer relationship marketing experts at the customer data platform Optimove. Challenger banks need to find new and personalised marketing strategies to keep brand-agnostic customers loyal – or else they will be made irrelevant by other agile providers with better product offerings.

Roni Cohen, Director of Data Science at Optimove, comments:  “In the age of Open Banking, the best way for these agile technology driven banks to effectively implement personalisation is to make the most of the available customer data, which is now also available to their competitors.

“A customer-centric approach using advanced technologies can help create a long-term competitive advantage. This can be done by looking at customer data to find out what value means to each person, and communicating with customers in an emotionally intelligent way to create value for each and every customer. By using AI, banks’ marketers can gain actionable insights and build effective campaigns and strategies that will target customers at the right time, the right channel and with the right offer for a fully personalized experience.”

Roni concludes: “As consumers see an increasingly personalised experience, challenger banks will be able to distinguish their brands with promotions and rewards tailored to each individual – just like retailers do.”

(Source: Optimove)

What’s that saying? You’re more like to get divorced than you are to switch your bank account. Below Matt Shaw, Strategist at RAPP UK, explores why high-street banks need to re-connect with young customers or face losing the next generation to digital first challengers.

For ten years now consumers have been used to getting less from their banks. Lower interest rates, fewer high-street banks and little reward for their “loyalty”.

Against this backdrop a quiet revolution has begun. New digital first challenger banks like Monzo, Atom and Starling are offering something genuinely different and are hoover-ing up younger audiences in the process. What’s more, Open Banking is set to explode consumer choice and making comparing and switching banks easier.

While these challengers pose a threat, established retail banks have a limited window of opportunity. At the moment young consumers are using these challenger bank accounts as “play money”, a supplementary account, allowing them to budget better, rather than a direct rival to the Big Four. However, this “play money” perception is likely to change as customers become more engaged challenger banks’ products and their brands become more established and more trusted.

Traditional retail banks need to sit up and take note if they want to capture the next generation of customers.

Driving preference

Whilst loyalty may be dead, retail banks still have an opportunity to deliver value to their customer base and protect against digital first challengers. Rather than aiming for (and missing) loyalty, retail banks should look to consistently drive preference across the customer lifecycle.

At RAPP we use three key elements to drive preference: Value Perception, Customer Experience, and Generosity.

Good customer data is central to all three of these elements. While new digital first challenger banks have no issues with this, it’s safe to safe that many retail banks will need to get their legacy data and systems in order if they want to deliver these elements.

Value Perception

One of the easiest ways retail banks can drive preference is by reflecting and reminding customers of the value they receive and the relationship they have.

Digital first financial services are currently leading the way in this space. Savings app Chip uses AI to analyze customer data and recommend opportunities for them to squirrel away money into their account in real time. Whilst this is a great new customer experience, the app is also amazing at replaying value back to customers. When money is transferred from your account, their friendly chat bot notifies you with an encouraging message and a humorous gif telling you that you’re #winning. When you ask for your savings balance they not only replay your balance, but your savings to date, your interest rate, the value of this interest and when this interest is due.

Customer Experience

The customer experience gap between digital first challenger banks and established retail banks couldn't be much greater at the moment. Whilst new challenger banks have no high-street stores, they’re beating established banks where it counts, through digital and mobile apps.

Monzo, Starling and Atom offer a stark contrast to the mobile apps of established banks. Their platforms offer spending analytics, integration with third parties and enhanced functionality like bill splitting and money pots; in comparison established banks can offer only the most basic functionality (balance enquiries, payments). Moreover these new challenger banks are constantly evolving their offering, while established banks can only give their apps a UX facelift with no new functionality.

New challenger banks are raising expectations of what a bank should offer consumers, particularly among urban millennials – something established banks should be concerned about as they are the most likely audience to switch provider (32% say they are “very likely” to switch in the next year[1]).

Generosity

Generosity is all about recognizing and rewarding customer engagement through regular value-adds that make customers feel valued.

Retail banks need to get out of the habit of using the transactional rewards based on cash back and increased interest rates. Instead, retail banks should looks to create value through customer data and collaboration with third parties. Both Starling and Monzo have added “marketplace” functionality to their apps allowing third parties to offer customers their services. Starling have two “loyalty” schemes (Flux and Tail) offering customers instant cash back when they make a purchase at restaurants and shops. However, this functionality has the ability to grow exponentially, and into non-financial generosity, with Open Banking making it simple for banks and third parties to interact.

Established retail banks can no longer sit back and let inertia reign supreme. Not only are new banks challenging the status quo and winning younger audiences, their nimble user interfaces and pristine databases mean they are also the most likely to profit from the future innovations of Open Banking. Established retail banks need to wake up to the challenge and rediscover how to drive preference. They can do this by innovating their customer experience to match new heightened expectations, using customer data to replay value and by smattering their base with product and non-product generosity.

The London Assembly Economy Committee report ‘Short changed: the financial health of Londoners’, published in January makes a number of recommendations for the Mayor of London, including:

• Work with the financial services industry, schools and colleges to create a young person’s banking charter, with the aim of ensuring all 16-18 year olds has a bank account. The Charter should include a commitment from banks to provide young people with a bank account by default.
• Commission an annual survey of London households on their financial activity, in order to get a better understanding of London’s ‘underbanked’ communities.^[6]
• Hold a Money Advice Week to promote affordable credit and use TfL advertising space to promote credit unions.
• Work with schools, charities and the financial services industry to deliver high quality financial education for young people.

Some of the reports findings include:

• 44% of people in the UK, who are in financial difficulty are between the ages of 18 and 34.
• Around a quarter (27%) of 18 to 30 year olds in London say they are in debt all the time.
• A third of all users of high-cost loans are 18-34 year olds.
• 40% of 18-24 year olds are less confident about managing their money, compared to 22% of the rest of the UK adult population.

Caroline Russell AM, Chair of the Economy Committee, said: “The cost of living has increased in the capital and many Londoners are cut off from accessing affordable financial services, such as loans and credit cards. They have to turn to high-cost credit, like payday lenders to make ends meet.

The Mayor of London has committed to tackle financial exclusion in London. While technology and innovation is one part of the solution, we want the Mayor to show real leadership in improving the financial health of Londoners.

It is absolutely crucial that young people are given the right support in terms of their finances, when they leave school. For many, it is the first time they will be responsible for their own money.

Education and support are key, as actions at this critical stage can have real consequences, in terms of credit ratings and long-term financial health. We strongly urge the Mayor to target his efforts in helping this group specifically.”

(Source: London Assembly Economy Committee)

The World Economic Forum has warned that future generations will be haunted by the effects of a global pension crisis that is brewing today. The FT's Josephine Cumbo speaks to Michael Drexler, head of financial and infrastructure systems at WEF, about what can be done.