Why Aren’t Millennials Investing?

Millennials aren't investing because they lack the knowledge and funds and are afraid.In the past year, I have seen a number of troubling statistics about Millennials not investing in the stock market.  One study said 60% of Millennials aren’t investing and another said 80%.  No matter which number, that percentage is too high.  That is an incredibly large portion of the population that is not participating in the capital market in this country.  If it continues, it could have ramifications on the economy as a whole.  And Millennials that did not invest could also see trouble in their future when they don’t have enough money to retire and Social Security is diminished. The question I now ask is why?  Why are so many Millennials not investing in the stock market? There are a number of reasons but let’s look at three big ones:

  1. Lack of financial literacy and knowledge
  2. Lack of money to invest (cough, student debt, cough)
  3. Fear of risk

All of these reasons have merit so let’s take a deeper look and see if we can address some of these reasons and look for a remedy to this problem.

Lack of Financial Literacy and Knowledge

One of the first hurdles many Millennials see to investing is a general lack of knowledge. No one taught us about investing or personal finance in high school or college. This is especially true for younger Millennials.  Older Millennials saw what happened in 2008 when it was constantly in the news. When most of our knowledge about investing and the stock market comes passively from social media, we can get conflicting information. It takes a lot of work to see out the knowledge needed to invest.

Luckily, there are professionals out there that can help, however there is a lack of relatable experts for Millennials. The average age of the financial advisor is 55 and there are more advisors over 70 than under 30, so I understand the challenge of finding someone to talk to about investing. Many Millennials also see the typical investor as an “old, white male.” It is tough when you feel removed from investing to seek out the information, but the education is out there and the professionals are as well.

Lack of Money

The second hurdle many Millennials encounter is a lack of financial resources. We are trying to do a lot of things in our financial lives including paying for weddings, buying homes and paying off student loans. These can eat up a lot of extra cash flow that might otherwise go towards goals that involve investing. Student debt is one of the big ones I see. Those loan payments often are a priority and can outweigh any additional savings towards retirement and other goals. But you should make sure you are prioritizing your goals so that the funds are allocated based on goals.  Time in an important component to investing even if you only allocate a small amount of money toward a goal like saving for retirement. For older Millennials, many are getting the message that the stock market has the potential for financial gains if you start early. There are always risks, but compound interest can work in your favor when you have a long time horizon.

Fear of Risk

Speaking of risk, Millennials find themselves more risk averse when talking about the stock market because of what many of us saw in the various bubbles in the 2000’s. We also saw our parents become unemployed or forced into early retirement.  It has made us more cautious about investing and skeptical of financial institutions. It also has an affect how we feel about risk over the long term. But we are taking on risks in other areas.  Our entrepreneurial spirit is having us take risks to start our own businesses. It is encouraging to see Millennials take calculated risks in certain areas. However if you are risk averse, it might be worth it to work with a professional. It’s hard to be objective with your own money and to take the emotion out of it, but an advisor can come in handy to help navigate the tough times in the market.

What Should You Do Now?

Lack of knowledge, lack of funds and fear of risk are all valid concerns and reasons not to invest, but they can all be overcome. Having the ability to invest is a privilege that is earned by mastering cash flow, establishing a cash reserve and identifying financial goals that you want to invest towards.  I would encourage all Millennials to keep pursuing the knowledge of personal finance and investing because it is the key to financial empowerment, and who doesn’t want to be empowered?

If you aren’t currently investing, it’s ok.  You can get there. We are a resourceful generation and have the ability to figure things out.  Technology is providing a lot of new opportunities for Millennials who are conscious of fees and want transparency.  For Millennials who place a premium on their free time, these tech developments along with professional help can be beneficial.  There is no silver bullet when it comes to investing but don’t miss out on saving for future goals because of fear or lack of knowledge – the funds one will come in time- just keep crushing it!

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