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Motivate your millennial into saving money

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Millennials — who have substantially lower incomes and bigger education debts than preceding generations — now also have a negative 2 percent savings rate, according to Moody’s Analytics’ analysis of Federal Reserve data.

Parents may feel powerless to influence children in their 20s and early 30s, but in reality, there are several smart strategies to help adult kids get in the habit of saving. Young adults may even be more receptive to parental advice than when they were younger and knew everything.

“Parents think, ‘Why would they listen to me now when they never did before?'” says Janet Bodnar, author of “Raising Money Smart Kids” and the mother of three millennials. “But in fact, they do.”

Here are some ideas that can help.

Be a 401(k) cheerleader. J.J. Montanaro, CFP professional with USAA, recently sat down at a computer with his 25-year-old daughter to help her sign up for her company’s workplace retirement plan and pick investments. “Don’t just talk them through it,” Montanaro advises. “Walk them through it.” Millennials may be confused by investing terms or fearful of another market swoon, which hands-on assistance can help them overcome. “The hardest part for anyone,” Montanaro says, “is to get the ball rolling.”

Make sure they’ve got the right student loan repayment plan. Income-based repayment plans, including Pay As You Earn, can dramatically lower monthly payments for strapped federal student loan borrowers. But many borrowers either don’t know these options exist or how to apply. Help them research and sign up for the best plan. If you can afford it, you can assist in paying down their loan principal, says Bodnar, who gave her daughter money to do so as a wedding present. But don’t help your kids at the expense of your own savings goals, she warned.

Help them set up a Roth IRA. Instead of Christmas presents this year, Montanaro plans to contribute “a small amount” to the Roth IRAs that he’ll help his daughter and her husband open over the holidays. Roth contributions aren’t tax deductible, but the money can be withdrawn tax-free in retirement. Your kids need to have earned income at least equal to the amount they contribute (or you contribute for them), up to a limit of $5,500 in 2014. Here’s where their low incomes come in handy: The ability to fund a Roth phases out for modified adjusted gross incomes of $114,000 to $129,000 for singles and $181,000 to $191,000 for married couples filing jointly.

Share your story. If you’re a longtime saver, consider sharing your retirement account statements with your progeny and tell them how even the smallest contributions can add up to big money over time. “Even if you’re only putting away 1 percent or 2 percent now, at least it’s something,” Bodnar says. “You’re going to be in the savings habit, so when things get easier you can beef it up.”

Or share your regrets. If you don’t have a lot saved, let your kids know you regret not getting an earlier start on retirement savings or that you cashed out accounts that were meant for retirement. (One handy factoid: Every $100 cashed out of a retirement account can incur taxes and penalties of $25 to $50, plus you’re losing $2,000 or more in future retirement income — the amount that $100 could have grown to if left alone for 40 years, assuming 8 percent average annual returns.) Just don’t let embarrassment over the state of your finances keep you from talking about money. You don’t have to be a financial genius to help your kids.

“A lot of the questions kids have are very basic, even though they’re in their 20s,” Bodnar says. “If you don’t know the answer, you can find out together.”