Why aren’t millennials investing? Fear isn’t the only factor

Young people may be scared of investing, but financial factors are also at play.

by. Danielle Maddox

Most analysis of Generation Y’s relationship with the stock market focuses on millennials’ reaction to the recession, but fear is not the only reason young adults don’t invest in the stock market. According to recent research, they have substantial financial obstacles as well, mostly in the form of student loans. In January, financial services firm UBS surveyed over 1,000 adults ages 21 to 29, and found that millennials devote less than one-third (28 percent) of their portfolio to stocks and over half (52 percent) to cash while non-millennials keep almost half of their portfolio (46 percent) in stocks and less than a quarter (23 percent) in cash.

Today’s recent graduates witnessed one of the most turbulent market cycles in recent U.S. history. They watched their parents struggle through the recession, and many of them suffered unemployment in the wake of it. Analysts have even compared millennials’ conservative money habits to the investment behavior of young adults during the Great Depression.

“If we look at what was happening in the world when they were growing up, we can understand how this makes sense,” says Betsy Flanagan, president of WorkStrengths, a California company that helps people find work and assists businesses in employee engagement, and former wealth manager. “Millennials grew up during the Internet crash, the financial crisis of 2008, the housing bust, and watched while their parents’ financial assets and security got crushed repeatedly, and they worried about how they would ever be able to retire.”

Danny Groner, a 31-year-old marketing professional in New York,​ graduated from college in 2005​ and was derailed early in his career by the recession​. His primary concern, given the state of the economy, was to pay his monthly bills, and he did not begin thinking about saving or establishing a 401(k) until about five years into his career. “The idea of saving definitely wasn’t on my mind,” Groner says. “I built up some momentum and worked on a monthly publication … [I] figured around 2008 I would move to the big city and get my feet wet, but unfortunately the recession set forth.”


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