Millennial savers often have better financial habits than older generations.
Studies have shown many young adults in their 20s and early 30s are better at tracking expenses and sticking to a budget than baby boomers, who are generally the parents of millennials.
But other research shows millennials may be holding themselves back from achieving long-term growth since many of them lack knowledge and confidence about investing.
"Certainly when it comes to investing, it's not something they're very familiar with so they're shying away from doing that," said Lauren Lyons Cole, New York City-based certified financial planner. "But it really cuts down on the amount of wealth they can accumulate over the course of their lifetime."
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Millennials' attitudes about investing, however, may be changing. Three-quarters of the top investment strategists surveyed by Bankrate.com in June said they expect millennials will increasingly stop holding onto so much cash and start putting more money in the stock market. But it may take time.
"What you have to realize is that when you're young you can afford to take on risk," Cole said. "You may have a 40-year time horizon, it can even be 50-year time horizon, and that is a lot of time to allow the market up and down movement to impact your portfolio in a positive way."
To become savvier about saving for the long term, financial advisors suggest millennials take these four steps:
Prioritize your financial goals
What's your five-year plan? Nearly two-thirds (64 percent) of millennials surveyed by iQuantifi said saving for retirement was a top goal in the next five years. Yet, retirement savings fell behind saving for a vacation (68 percent) or buying a car (66 percent). Saving for retirement also ranked slightly higher than paying off all my debt (60 percent) in the five-year plan of millennials in that survey.
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It's important to focus on what you can do today as well as down the road, said Douglas Boneparth, a certified financial planner at Life and Wealth Planning in New York City. "When you have multiple financial goals, but only so many resources to allocate toward those goals, it takes a lot thinking and introspection to come up with that priority," he said.
Save at least 15 percent of pay
Millennials who are saving money in a 401(k) at work are not saving at least 15 percent of salary, as T. Rowe Price, Fidelity and many financial advisors recommend. But at 8 percent, millennials are saving nearly as much as baby boomers, according to a new T. Rowe Price survey, and are poised to steadily increase their savings rates.
Increase retirement savings rate annually
More millennials have increased their 401(k) savings this year compared with baby boomers, T. Rowe Price found. Almost double the percentage of millennials are saving a higher percentage of their income in 401(k) contributions in the past 12 months compared with those who are generally in their parents' generation.
Seek professional financial advice
More than half of millennials have sought professional advice or used an app or online financial tool, according to the iQuantifi survey. About 38 percent of millennial savers in the T. Rowe Price survey have employed an advisor in the past five years, including 11 percent who have used robo-advisors. Younger consumers are excellent comparison shoppers and may prefer using digital tools.