Do Millenials Have Money To Invest?
A recent Bankrate survey shows that just 26 percent of Millenials say they own any stock. That sounds about right to me. As a former financial advisor, I never conducted any official, statistically valid surveys, of course, but I did talk to a lot of people, many of them younger. Younger people, like Millenials, almost never became my clients. The feeling was mutual.
You see, most younger people don’t HAVE any money, even if they are currently making it. If you graduate from college at say 22, and you get a job paying $75,000 per year, then you are doing pretty well. But, you may have student loans; you probably would like to buy a house; you might be getting married and saving for a wedding. Of course, you might also be enjoying your freedom and taking trips, buying cars, and so on.
The thing is, even if you were saving 10 percent of your income that still means you only have $7,500 of investable assets after a year. $15,000 the next, and so on and so on. By the time you had even the minimum of $100,000 that makes it worth even a junior-level financial advisor to take you on as a client, you are in your 30s, at best. In other words, there is a very big difference between cash flow, and actual assets.
Of course, investment returns and compound interest help, but they take a long time to kick in. The result is that unless you inherited money, or got a big gift or bonus somewhere along the line, the only reason you would own any stocks at all is if you signed up for your 401k (which you should do, right away as part of any retirement plan), you don’t really have any money to put in stocks.
Many Millenials cited in the survey, however, stated the reason they don’t own any stocks is lack of information and understanding. That’s not surprising. They don’t really teach that stuff in schools, and the current narrative in our country supports the theory that the financial professionals out there aren’t always looking out for your best interests, rather than their own bonuses. That means there really isn’t any place to turn to learn what you need to know to have a solid financial plan and good finances. (I try, but there is a lot of knowledge to cover out there 🙂
For those under-30 today, the other issue is student debt. The reports about the levels of student debt are exaggerated for news headline purposes, but the fact remains that many younger adults do have $20,000 to $40,000 in debt. While that isn’t crippling (student loan repayment options offer very low monthly payments) many younger adults watched their parents get in trouble with debt. That means their focus is paying off those loans, not investing. And, with the exception of dropping some money in a 401k plan, that is a smart move.
Of course, this will all turn around eventually. Someday soon, more people will remember rising stock markets and friends who ended up with big nest eggs than people remember plunging markets and a financial crisis that we were lucky to pull through thanks to strong Federal Reserve leadership. In the meantime, experts in the press will wring their hands about low investment rates, and everyone will do what they always do, figure it out, pay their bills, send their kids to college, and then find a way to make it in retirement.