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Advice for the millennial who has begun saving for retirement: Don't get ahead of yourself.

Financial planning for today's young adults requires what could be an unprecedented level of balancing between short- and long-term goals. Without question, millennials need to save with machine-like discipline for retirement. But money put away for retirement in your 20s might be needed for a house down payment, or to cover expenses between employment contracts.

For some ideas on how millennials can juggle all these financial goals, let's consult with a pair of advisers who are part of this demographic group. Ben Felix is an investment adviser with PWL Capital in Ottawa, and Shannon Lee Simmons is a financial planner in Toronto who calls her firm The New School of Finance.

Both were asked to address three millennial profiles:

1. The wealth-building renter

This person is either priced out of the housing market or chooses not to buy. To build comparable wealth to the home owner who gradually pays off his mortgage, this individual will need to invest aggressively. To add to the realism of this profile, we'll assume this person does not have a company pension.

Ms. Simmons said a first step should be to build up an emergency fund in a high-interest savings account to cover three to four months' worth of expenses. Some good news here is that a renter may not need to put away quite as much as an owner because there's no risk of surprise household maintenance emergencies.

Once the emergency fund is topped up, millennials can start investing. Mr. Simmons suggests building a portfolio using a mix of 75 per cent stocks and 25 per cent bonds or guaranteed investment certificates. "If you don't have a pension and you don't have an asset that is building equity like a house, you need to take a little more risk," Ms. Simmons said. "You don't want to see something like 60 per cent in bonds."

With up to as many as 40 to 45 years to go until retirement, there's a case to be made that millennials can forgo the comparative security of bonds entirely and embrace the greater risk-return potential of stocks. But Ms. Simmons believes in having at least 10 per cent in bonds or GICs. "Maybe I'm a typical millennial who was burned in the 2008 financial crisis, but I believe that some padding of volatility is important."

Mr. Felix suggests wealth-building renters use a registered retirement savings plan for their investing. The reason is purely behavioural – it's harder to impulsively withdraw money from an RRSP than it is from a tax-free savings account.

"The biggest thing here is discipline," Mr. Felix said. "One challenge that I've seen in dealing with people of my own age is that they don't have a ton of discipline and they change their minds really quickly. For that reason, when someone decides with conviction that they're going to rent and invest, I think that using the RRSP as a savings vehicle can be helpful."

Mr. Felix said a rough rule for the wealth-building renter is to invest as much as possible of the savings realized by renting, specifically money that owners would pay for property taxes and home maintenance. These monthly costs vary according to city and house size – a rough guide would be $400 per month in property taxes and, for maintenance/upkeep, 1 per cent of a home's value divided by 12.

2. The contract worker

With no employment insurance, Ms. Simmons says people jumping between temporary jobs should have enough saved to cover six months of expenses. "This person needs a hefty, hefty emergency fund," she said.

Investing can begin once the emergency fund is topped up. But if money is taken out of the emergency fund, replacing it takes temporary precedence over making regular monthly investments. If you miss an investment contribution one month, try to make it up later in the year.

"A strategy I suggest here is to make annual savings targets for long-term investing instead of monthly targets," Ms. Simmons said. "So instead of saying $300 per month, we say, "you're going to try and hit $3,600 a year."

For a further margin of safety, Ms. Simmons suggests temporarily parking your periodic investment contributions in a high interest account. "At the end of the year, you take from that account and you put in an RRSP or a TFSA – whatever. The point is that you've had access to it all year. You're not making a decision to invest for the long term until you're secure."

Ms. Simmons suggests filling up the TFSA first – the annual limit this year is $5,500 – and then putting additional savings into RRSPs. While Mr. Felix sees the easy accessibility of money in a TFSA as a potential risk for millennials, Ms. Simmons views it as an advantage in that it provides flexibility for people whose financial goals suddenly change.

3. The undecided millennial

Mr. Felix well knows how millennials can change their minds about their financial goals. "I've had a handful of people tell me I'm ready to start investing, I'm really excited about it. Six months later, I get a phone call or e-mail saying, 'I just closed on a house, I need to cash out my RRSP, what do I do?' I've learned my lesson now and I'm very careful about how I approach those people."

This means questioning clients closely about their goals and plans. If there's any indication of uncertainty about home buying, weddings and such, he suggests keeping all funds in a high interest savings account and ignoring stocks entirely.

On our new Gen Y Money Facebook page, a group member recently posted a question about the best way to store money that will be used in two years for a house down payment. A few people said they were investing their down payment money in stocks and claimed to be making much higher returns than high interest accounts.

Mr. Felix said the risks of investing in stocks are not worth the potential upside when saving for a house. For example, the stock market could fall 20 per cent in the months before you plan to buy a home.

Eventually, undecided millennials have to make up their minds about their financial goals. Ms. Simmons pegs age 35 as the upper limit. "You can still have a really good effect on your long-term retirement portfolio with a normal amount of saving from 35 on."

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