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The Shocking Reason why Millennials Are so Good at Saving and Bad at Investing


Millennial is a term used to refer to those who have reached young adulthood in the early 21st century. They are also described as Generation Y or the Net Generation. This demographic of people is the most diverse, it features more women and people from all persuasions of life. Most of these young people are well-versed in world affairs and are more than handy when it comes to operating computers and other machines.

Only 1 in 3 Millennials has a stake in the stock market

Given the fact that making investments is all about having information and using it to our benefit, it would be natural for anyone to assume that millennials are at the very forefront in terms of making investment decisions. The truth is, they’re not.

Millennials tend to have a very good saving culture. About three-quarters of millennials have some money stashed up somewhere as savings. The main reason for this would probably be thanks to the generation that preceded them.

A recent survey conducted by Bankrate has shown that only a third of Millennials actively make investments in the stock market. This can be blamed due to the fact that most were able to live and experience the recession as it happened. Given the fact that they were able to witness the harrowing effects of the recession, most millennials don’t really have that much faith in the stock market.

At Fault

In a way, culture is partly to blame for this. Many movies and TV shows have well-documented takes on how wild the stock market is. They often tend to show people screaming at each other over the phones, throwing stashes of paper all over and frantically running from one meeting to the next.

Many millennials take on a ‘do-it-yourself’ approach to making financial decisions like investments. Savings are the key source of investments since most prefer playing by their own rules when it comes to controlling their expenditures. Older generations are more likely to rely on the IRAs (Individual Retirement Accounts) or a 401(k).

Many Millennials experienced the recession at a young age, this trauma may have caused their cautious approach to the stock market

Many believe the recession is greatly responsible for the lack of trust in millennials’ operations with money. Even when they decide to venture into the investment industry, most of them don’t go big. Instead, they often take small-calculated risks. Though this is an admirable quality, one can only reap large rewards once they fully commit to the cause. A recent report shows that 85% of millennials would rather just play it safe than go all the way.

Another hurdle most millennials seem unable to overcome comes in the name of student loan debts. With these loans, there’s always the temptation to pay them off as quickly as possible in order to prevent the accumulation of compounding interest rates.

The probable best remedy that would see millennials change mindset is an improved economy. A good economy would provide a good platform for them to risk more and reach out for more advice from those that are experienced in the stock market. We list out a couple of tips for millennials looking to dive into the waters:

Make Utility of Employer and Government Programs

Roth or 401(k) are often seen as retirement accounts. However, such kind of thinking creates a negative perception of reality. 401(k) presents the chance for individuals to access funds invested in mutual funds that comprise bonds, stocks, and other investments. Employer-based deductions towards such initiatives can go a long way in securing one’s future.

Keep Track of the Sheets

Millennials can play to their strengths by using technology in making investment decisions

Being cognizant of one’s own financial situation is important since it can help one make the right investment choices. Given the fact that millennials are the most tech-savvy generation, making utility of apps that are able to project and track data is a good place to start things of.

Using online platforms, one is sure to stumble upon a number of websites and apps that offer great incentives for investments. Recommended sites like Mint, LearnVest, Ameritrade, SigFig, and E*Trade can offer insights to those new to the stock market industry.

Sharing Economy

Knowledge is power. The same way millennials are well-versed in money-saving initiatives like sharing cab rides, homes, and other financial expenditures, they can do the same when it comes to investments.

Business Development Companies offer a platform for people to support the community by pooling money together to create necessary investment capitals. BDCs are able to lend to middle market American businesses, thus, investing doesn’t necessarily need to be a thing for the wealthy only.

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