Kids these days.
Putting aside the generalizations about my generation — that we are self-indulgent, lazy, spoiled and so on — one widely held perception seems to be true: Most of us aren’t racing to toss our money into the stock market.
In the past, I’ve mulled potential reasons for this (and explained why 20-somethings should invest). But this week, I opted for a straight-from-the-horse’s-mouth perspective on Generation Y and investing, chatting with nine 20-somethings who all graduated within the past four years.
Going into it, I expected most would not be in the market, save for a small contribution to company-sponsored 401ks. To an extent, I was right: Only one recent grad owned any securities outside his 401k, though a couple expressed a desire to go a step further than a work-sponsored plan down the line.
But just less than half of these people weren’t even offered a 401k plan at work; most worked for small companies as full-time employees or couldn’t find salaried full-time work.
This shed light on something I hadn’t explicitly considered: Economic headwinds are preventing many millennials from getting a job that offers a work-sponsored retirement plan — the perfect starting point for investing — in the first place. Also, those who don’t have the option of a 401k (and even some who do) sometimes feel like they don’t have the funds or knowledge to get started on their own.
Heck, even those that might or do have the funds don’t feel like jumping into the market is a priority at this time.
Take a look at what some of these 20-somethings had to say on the matter:
“My job does not offer a 401k plan and I don’t own any stocks because I simply don’t have the money — whether my own or money given to me from my parents. I’ve just never had it to spare … especially in our current economy. Between rent, living expenses, loans and so on, there’s not a lot left to put into stocks. Until I find more full-time work, I’m not really thinking about getting into the market.”
“I am not in the market because my company doesn’t offer a 401k and I wouldn’t know how to start or where to begin on my own. I really have no clue how to choose a company to invest in, or how to go about buying shares if I did choose one. To invest, I would need someone to guide me in the right direction, but no one I know my age has even thought of that or knows what it is … or at least none of my friends. It’s like a foreign language to us.”
“My company offers a 401k plan, but I haven’t made an initial investment yet. I plan to, but I can’t really afford it right now. College loans take almost 50% of each paycheck and while I could choose to have my loans lowered, I decided to pay the maximum amount while I am living at home. With the way things are now, I would more or less have to be comfortable living by skin of my teeth and sacrifice a lot of things to build up my 401k.”
“I haven’t pursued stocks or anything because of a lack of knowledge, I suppose. My parents invest in stocks — or have in the past — so I think that would be the route I’d go, but I’m not really sure how the stock market works.”
“My company does not offer a 401k and I am not currently in the market otherwise. I plan on it in the future, but I would like to be more settled down first. I’d like to have my own place, more savings and probably take my relationship to the next level. I also would feel better having my student loans a bit more under control before I started putting income elsewhere.”
On top of that, a lack of knowledge seems to be an issue even for those who don’t actually admit it. In my small sample group, the respondents who expressed sound reasoning for participating in their company’s 401k or a goal to get into the market still only spent about an hour or two per week reading financial news.
Several of the other respondents didn’t spend any time keeping up.
Bottom line: It’s easy to shake a finger at 20-somethings for seemingly sitting on their money, but lack of impulse or education about the markets are just part of the equation. Many people aren’t even afforded the chance to participate in a 401k plan right now, and times are tight for all.