Millennials have been scarred by the 2008 financial crisis, difficulty finding work out of college, and managing substantial student debt. Many also witnessed their parents struggle with job and financial security during this time as well.
What’s the product of a generation that faces this unpredictable and challenging period, right at the onset of their careers? Vigilance.
Millennials are the most fiscally conservative generation since the Great Depression, according to a 2014 UBS survey on young people’s financial attitudes.
They report, “Young Americans between the ages of 21 and 36 keep more than half (52 percent) of their assets in cash, nearly double that of earlier generations, according to the UBS survey. And their fear of stocks is more closely aligned with World War II–era attitudes than with those of Generation X or baby boomers.”
Millennials have lost trust in the stock market and are averse to taking risks on their hard earned dollars. Instead, these young adults are turning to their parents for financial guidance.
While the concern and hesitance is understandable, staying out of the market altogether can be harmful down the road. “Longer life expectancies, rising healthcare costs and uncertain Social Security benefits could leave millennials struggling in retirement,” Giovanna Fabiano of The Alert Investor writes.
“Most financial experts agree that over the long term, investing in a low-cost diversified portfolio of stocks and bonds typically offers a higher rate of return than simply socking money away in a savings account. Thus, by investing, young people could boost their chances of growing a large enough nest egg to support themselves in retirement – possibly even before they turn 73.”
While the average millennial may not favor this approach, a trend towards technology-driven investment strategies seems to be on the rise, as seen by the growth of low-cost, automated online services such as Wealthfront, Betterment, Personal Capital and Future Advisor. These platforms grew more than 100 percent over the last year, according to financial analysts at the Aite Group.
Turns out millennials have more in common with their grandparents than they may have realized. While all investments come with an inherent amount of risk, it’s important for young adults to understand their potential long-term benefits. If millennials continue to reject options that could ultimately provide a financial cushion for retirement and health-care, some investment advisors say they could face working much harder for longer, and lose out on some of those (now growing more elusive) “Golden Years”.
Millennial or not, life is short. Millan & Co.’s investment advisors can walk you through all of the pros and cons of what may be the smartest risk you’ll ever take. Call 512-479-6819 today and “carpe diem”.