According to a recent survey, owning a property, getting married, or starting a family are top ambitions for more than 10 million1 Brits aged between 18 and 35. However these goals don’t come cheap and many studies suggest that young people struggle to achieve them. For example, unlike Baby Boomers, Millennials – people born between 1981 and 1996 - are far less likely to own a home. Indeed, only 33%1 of them are homeowners in their late 20s against 60%1 for Baby Boomers at the same age. While investing could help bring their long-term projects to life, most Millennials seem wary with studies showing only 11%2 of under 25s have non-pension investments. And yet with UK cash savings rates stubbornly remaining below inflation Millennials could potentially benefit from the power of investing to grow their money over the long term. So why are so many reluctant to join the investing world, especially as they have time on their side?
2: Boring Money Insights, Sep 2017 (p.23)
They don’t trust stock markets
Millennials may not all be fans of avocado toast, but they all have lived through the Financial Crisis of 2008-09, either when they were teens or as young adults, and this shaped their relationship with money and investing. Evidence suggests that many have developed the belief that markets present too much risk as highlighted by a recent study, where 66%3 of people born in the late 1980s and 1990s say investing in stock markets is scary or intimidating. However, Millennials might be overestimating the risks associated with long run investing and their experience of highs and lows, which are a natural and healthy phenomena of stock markets, has been coloured by the last decade rather than the last century. The 2008 crash shook the financial world and caught many investors off guard, but most markets have since recovered. For instance, the S&P 500 index lost 37% of its value during the 2008 crisis, however by 2012 it was back up to its pre-crash level4.
4: The Balance, June 2018 - https://www.thebalance.com/stock-market-returns-by-year-2388543
They can struggle financially
Many Millennials may be wary about investing if they’re already struggling with money. Whilst those in the media can be quick to accuse them of being lazy or not having their priorities straight when it comes to money management. This ignores a more complex reality. Not only do these young adults find it harder than prior generations to get a stable, well-paying job, they’re also faced with low and stagnant wages whilst the price of many things (inflation) is going up. It was found that household incomes held by Millennials in their early 30s are 4%5 lower than members of Generation X at the same age (people born between 1960 and early 1980s). As a result, those Millennials struggling with expenses, end up delaying expensive milestones. At the same time, this also means they are delaying saving and investing and missing out on the magic of compound returns. The earlier you start investing the better, giving you a longer investment term, which should allow small sums to hopefully build into larger ones. Digital platforms, like Wealthify, which believe that investing should be an option for everybody, allow you to invest from as little as £1 to help you bring your long-term goals to life.
5: Resolution Foundation, Feb 2018 - https://www.resolutionfoundation.org/media/press-releases/millennials-income-gains-have-stalled-across-advanced-economies-but-the-uk-stands-out-for-its-living-standards-and-housing-boom-and-bust/
They might think investing is too complicated
Millennials may be reluctant to enter the investing world because they believe it is too complex and out of their reach. Some Millennials might also believe investing is only something you can do when you’re rich and they might not necessarily know you can have someone do it for you. But now with online investing services, knowledge or previous experience aren’t necessary prerequisites to start investing, since everything, from investment picking to portfolio management, can be done for you by experts.
Figures in this blog are based on past performance and past performance is not a reliable indicator of future results.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Investing is for everyone.
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.