Why They Don’t
Millennials are scared to invest. According to a new research from Bankrate, 67% of people ages 18 to 37 consider putting money in the stock market as not a viable option for long-term investment. Compared to older generations, Millennials would much rather choose cash over other methods. In fact, nearly 33% of Gen X and 38% of Baby Boomers actually prefer investing in common stocks over saving in cash or betting on bitcoin or real estate.
Millennials don’t want to invest in stocks because they’ve experienced the market crash first hand twice in their lifetime — Dot-com crash & Financial crisis of 2008. Not only that, they have a difficult time accepting the notion that their funds aren’t usable until decades later. What they do accept, however, is filling up their immediate needs with cash or credit that are readily available for them to use (e.g. student loans, mortgage, etc.).
Why They Should
Despite the issues of investing for Millennials, there are numerous reasons why investing — or rather investing EARLY, is actually good for them. If you are hesitant about putting your savings in the market, you may want to consider the benefits below and weigh your options.
1. Time is on your side
One huge advantage to investing early is, of course, having time by your side. This is essentially your biggest asset. The best way to maximize returns is through a process called compounding. This is when your investments grow with interest, adding incremental amounts over time. So you are missing out on compound returns if you just let your money sit at home. Each day that passes is a day that goes uninvested.
2. Money works for you
Once you put money into savings at a bank, your money will slowly be eaten away by inflation. Inflation is the rate at which your purchasing power falls due to the general rise of prices in goods and services.
While investing has risks, the biggest downfall for any investor is missing out on the possibility of growing his assets for long term growth and likely losing his purchasing power later on.
3. Retire early
When people save for retirement, they should put away at least 10–15% of their paycheck each month. While this is ideal, studies show that over 20% of Americans don’t save anything for retirement. And nearly two thirds of them do not participate in 401(k) plans. Without compounding and investing early, retirement can be more stressful than it should be.
4. Improve spending habits
A great benefit to getting your financials in order and being able to put away money for investments earlier on, is the ability to develop positive spending habits. Learning important lessons about budgeting, spending, and saving can be crucial to maximizing your money in the long run.
Investing is tough and we all know there are risks involved. While Millennials may have a good excuse, the matter of the fact is, the risk may be even greater if they don’t put their money on the market earlier on. Especially nowadays, you have every resource available online at affordable prices, free even to get started.
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