Millennials Falling Short on Investment Goals: A Call to Action
Introduction
Millennials aren’t investing their money as much as they should, according to a recent poll by CNBC and Generation Lab. The survey highlights a worrying trend among young adults, revealing that despite recognizing the potential of the stock market to build wealth, many are not taking the necessary steps to secure their financial future.
Survey Insights
The survey polled 1,013 individuals between the ages of 18 and 34 in the U.S. in late January. The results were striking:
- Nearly two-thirds (63%) of young adults acknowledge that the stock market is a great place to invest and build wealth.
- However, 61% stated that they aren’t saving for retirement each month.
- Almost half (48%) said that they do not have enough savings to cover more than two months’ worth of living expenses.
These statistics paint a picture of a generation aware of the importance of investing but struggling to take practical steps towards financial security.
Financial Expert Perspectives
Clifford Cornell, a certified financial planner and associate financial advisor at Bone Fide Wealth in New York, explained to CNBC that in general, millennials don’t have much cash saved up. He pointed out that the lack of emergency savings is a significant barrier to investing.
“That’s very indicative of why more people aren’t saving for retirement, why people want to invest but just generally can’t right now,” Cornell said. “They know they need to have cash reserves. They know they need to have a couple of months’ expenses before they start looking to invest in their retirement accounts.”
The Investment Gap
So, how much should millennials have invested in the stock market to retire comfortably? The answer varies based on individual circumstances, such as current income and desired retirement lifestyle.
According to Northwestern Mutual’s 2024 Planning and Progress Study, millennials have an average of $62,600 in retirement savings. The Motley Fool suggests that by saving regularly and investing in a diversified portfolio, millennials can grow their money sufficiently to afford a comfortable retirement.
To provide a more precise figure, SmartAsset suggests that a hypothetical millennial, starting at age 16, should aim to invest $10,000 per year in the stock market. By the age of 32, this could amount to over $150,000. This goal may seem daunting, but it underscores the importance of starting early and maintaining consistent investment habits.
The Positive Side of Millennial Investing
Interestingly, the millennials who do invest are quite adept at it. A report from the Federal Reserve Bank of New York, as reported by Business Insider, indicates that Americans between the ages of 18 and 40—mostly millennials—saw their wealth grow by 80% from early 2019 to late 2023. This increase is largely attributed to the rising values of their financial assets and stock market portfolios.
During this period, the S&P 500 increased by 90%, reflecting the gains that could be achieved by young investors willing to take risks. Younger investors tend to favor equities and riskier assets, while older adults nearing retirement prefer safer investments like bonds.
The Path Forward
For millennials looking to bridge the investment gap, several steps can be taken:
- Build an Emergency Fund: Before investing, ensure you have a safety net of at least three to six months’ worth of living expenses.
- Start Small and Stay Consistent: Begin with manageable investment amounts and increase contributions as your financial situation improves.
- Diversify Your Portfolio: Spread investments across various asset classes to mitigate risk.
- Educate Yourself: Utilize resources and tools available to understand the basics of investing and personal finance.
- Seek Professional Advice: Consult with financial advisors to tailor an investment strategy suited to your goals and risk tolerance.
Conclusion
The survey results serve as a wake-up call for millennials. While the stock market presents a lucrative opportunity to build wealth, the lack of regular retirement savings and insufficient emergency funds are significant barriers. By taking proactive steps to manage their finances and invest wisely, millennials can work towards a secure financial future and achieve the comfort they desire in retirement.
