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Why Millennials Aren’t Investing

March 19, 2018

While Millennials are criticized for carrying high debts and student loans, they are statistically much better savers than previous generations. Currently between the ages of 22 and 37, Millennials are saving more than any other age group! A survey from Bankrate found that 62% are saving more than 5% of their income and 29% of young adults report that they save more than 10% of their income. The latter group have even attracted the description “super savers”. Interestingly a greater proportion of Americans who make $30,000 – $50,000 per year are super savers than their young professional (“YoPro”) peers who make $50,000 -$70,000. While all this saving is commendable, millennials are extremely hesitant to put money in the stock market.

Only 1 in 3 Millennials is investing in the stock market. It’s probably no surprise that investors who grew up during the 2008-09 financial crisis would hesitate to dive in head first. Over 82% of Millennials say their investment decisions are influenced by the Great Recession. Many Millennials saw 50% or more wiped off their parents’ or older siblings’ wealth and are likely still scarred.

There seem to be four main reasons for Millennials’ preference to stay in cash. First, 50% say they are put off by the thought of losing money in a bad investment. Some are referring to this hurdle as the “Someday Scaries” – playing off the term “Sunday Scaries” which describes the feeling of anxiety before the upcoming work week. Young Americans know they will someday need to be more financially secure, but are scared to risk losing the money that they have saved. Unfortunately, many of these hesitant Millennials are jeopardizing their retirement, given that, over a long period of time, the stock market has historically performed much better than cash. For example, the S&P has returned almost 10% annually since its inception in 1928.

The second biggest reason for not investing (35%) was believing they do not meet the minimum required amount of money needed to invest. Hopefully this percentage will decrease as free investing apps like Robinhood, Acorns, and Stash gain popularity. One new app called Stockpile allows parents/grandparents to fund an account with a stock gift card that gives the lucky recipient shares of stock starting at just $5. Apps aside, most brokerage accounts offer $5 trades so this barrier to entry is becoming almost nonexistent.

The final reasons for not investing are less easy to resolve. 31% say they don’t know whom to trust to help them invest, and 24% admit they just do not know how to get started. Trust is obviously very important and you never want to rush that decision. Getting started investing in the stock market is certainly an area where you need to do your homework and walk before you run.

With 2008 fading in the rear-view mirror and investing becoming so easily accessible on smartphones, I hope many of these barriers to entry will soon be eroded away completely.

Dan Hall 

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