The Time to Start Investing is Now
Millennials aren’t investing. There’s tons of literature out there about it – the need to start investing, the description of how compounding can work for you, and the push to start planning for retirement (even though it seems far away). What many people don’t realize, however, is that we are extremely aware of the need to save- both for emergencies and retirement. The problem we face is twofold 1) We do not have enough disposable income to feel comfortable investing in the market 2) We have trust issues when it comes to the stock market and other big financial institutions.
Many millennials are not naively spending money with no thought for the future. In fact, many of us are actually playing it too safe. When I first started contributing to my 401K at age 22, I selected a conservative investment profile, despite being told I could stand to be more aggressive given my young age. It was 2010- I, like many other millennials, was scared of another recession in the near term. Millennials are so risk averse that many of us do not acquire credit cards until it’s absolutely necessary. When I was ready to get my first apartment, I had no credit history and, consequently, had to have my parents co-sign my lease. Even now, if I can’t pay off my credit card balance in full each month, I become anxious.
Overcoming the Roadblocks
Let’s start with the first problem I mention above- lack of disposable income. No, we aren’t just whining- living on a salary of $50,000 and paying rent in an urban area is tough! Add in student debt and commuting expenses and it should all make sense. A recent article in The Guardian stated that over the last few decades, people are able to save less and less of their income. In the 70s, it was difficult to save more than 10% of your income. Now, it is just as difficult to save a mere 5%!
The idea that we do not have enough money to invest stems from the advice that we have all been receiving for the past decade from teachers, parents, and financial institutions. It goes something like this- “when you start working try to save and invest 10-20% of your income.” Many people, myself included, hear this and think “I can’t possible invest 10% right now, so why bother at all?” That’s where the mistake is made. Just invest something. Even just 2% of your income is better than nothing!
Now for the second problem- lack of trust in the market and in large financial institutions. This one is much harder to tackle, but there are solutions out there, as discussed in The Growth of Do It Yourself Online Trading. No one will blame you for not trusting large financial conglomerates, but what you can do is trust in your own ability to learn about investing and make investing decisions.
Investing in the stock market inherently carries some risk; however, the risk of not investing may be greater. Previous generations were able to rely on corporate pension plans and social security in retirement. Millennials and Generation X-ers, are faced with providing for themselves in retirement, most likely without any help from government sponsored programs. It’s time to take matters into your own hands and investing in the stock market may be the way to do it.