Home About Archives RSS Feed

The Independent Investor: Millennials & Money

By Bill SchmickiBerkshires Columnist

Recent studies indicate our nation's youth are not investing in the stock markets. That's nothing new. It takes a rare individual under the age of 30 to have the wisdom to invest at a young age. For those who do, their future could be golden.

A recent survey by Banknote.com, a personal finance company, found that just 26 percent of individuals under the age of 30 are investing in stocks. That number hits home when we compare it to the 58 percent of people between the ages of 50 and 64, who do invest in the stock market.

Part of this lack of interest in stocks can be attributed to young people's attitude toward aging, retirement and death. When I was that age, I was invincible. Like me, at that age, the young believe they have all the time in the world to save. The younger you are the more difficult it is to identify with the concept of someday becoming too old to work.

But those attitudes account for only some of the reasons that under 30s shy away from investing, according to the survey. It appears that a lack of money and investment knowledge are also two important barriers to investing within this age group. Scarcity of funds in this day and age is understandable.

Between the financial crisis, income inequality, and the high cost of education, many young people cannot afford a place of their own, let alone the money to save and invest. Putting away even $100/month when you are unemployed or underemployed is a daunting challenge.

Their lack of investment knowledge simply underscores my contention that neither parents nor schools are teaching our children the importance of saving and investing (see my columns on "Kids and Money," Parts I & II).  Millennials are simply not equipped with the practical knowledge they need to make investment decisions once they are earning a paycheck.

It is a shame, because the absolute best time to begin saving is in your 20s. The most valuable asset these potential investors own is time. Another powerful tool at their disposal is compounding growth. Just how powerful is it?

Consider this: it will usually require just 10 years (using a 7 percent nominal rate of return) for an investment account to double. Just imagine what one dollar invested at the age of 20 would be worth by the time retirement time rolls around 45 years later. Many young people make the mistake of thinking that when they are 40 and making the big bucks they will make up for lost time when it comes to retirement savings. Wrong! The $100 a month saved when you are 25 is worth much more than the same amount saved at 40 years of age because compounding rewards early contributions much more than later contributions.

Let's say your annual income is $30,000 a year and you decide to save 10 percent of your estimated after-tax income ($2,160). In 25 years those contributions will grow to $288,001 using a 12 percent annual return, which is the long-term return of the U.S. stock market. If you put that money into a pre-tax IRA, that amount would be exponentially larger.

Unfortunately, few Millennials will heed this advice and fewer still read my columns. So, do your kid a favor and pass this column on to him or her. They will thank you for it later.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.

     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
Scoil Rince Bréifne Ó Ruairc Participated in North American Open Championships
Pittsfield Police Participating in US 20 Speed Enforcement Project
MassDOT Project Will Affect Traffic Near BMC
Dalton ADA Committee Explores Expanding
Milne Public Library Trustees Announce New Library Director
Clark Art Presents Free Thematic Tour on Music in Art
BCC, Mill Town Partner to Support Philanthropy Through 40 Under Forty
SVMC' Wellness Connection: March 15
Pittsfield Community Meeting On Rest of the River Project
Slavic Easter Egg Decorating At Ventfort Hall
 
 


Categories:
@theMarket (480)
Independent Investor (451)
Retired Investor (183)
Archives:
March 2024 (5)
March 2023 (4)
February 2024 (8)
January 2024 (8)
December 2023 (9)
November 2023 (5)
October 2023 (7)
September 2023 (8)
August 2023 (7)
July 2023 (7)
June 2023 (8)
May 2023 (8)
April 2023 (8)
Tags:
Recession Greece Interest Rates Jobs Bailout Markets Taxes Banks Debt Ceiling Pullback Europe Congress Rally Commodities Banking Economy Currency Employment Selloff Retirement Europe Stock Market Debt Stocks Federal Reserve Fiscal Cliff Oil Euro Metals Deficit Crisis Japan Stimulus Election Energy
Popular Entries:
The Independent Investor: Don't Fight the Fed
Independent Investor: Europe's Banking Crisis
@theMarket: Let the Good Times Roll
The Independent Investor: Japan — The Sun Is Beginning to Rise
Independent Investor: Enough Already!
@theMarket: Let Silver Be A Lesson
Independent Investor: What To Expect After a Waterfall Decline
@theMarket: One Down, One to Go
@theMarket: 707 Days
The Independent Investor: And Now For That Deficit
Recent Entries:
@theMarket: Sticky Inflation Slows Market Advance
The Retired Investor: Eating Out Not What It Used to Be
@theMarket: Markets March to New Highs (Again)
The Retired Investor: Companies Dropping Degree Requirements
@theMarket: Tech Takes Break as Other Sectors Play Catch-up
The Retired Investor: The Economics of Taylor Swift
@theMarket: Nvidia Leads Markets to Record Highs
The Retired Investor: The Chocolate Crisis, or Where Is Willie Wonka When You Need Him
The Retired Investor: Auto Insurance Premiums Keep Rising
@theMarket: Melt-up in Markets Fueled by Momentum