Why people under 35 aren't investing
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If you are under 35, I’m worried about you. Really worried. That’s because chances are high you aren’t investing.
A Gallup Poll indicates that fewer than half of all households led by people who are 35 or younger own any equity funds or stocks.
What that tells me is that young people are not putting money aside for their future. What are they going to do when they reach retirement? This question scares the daylights out of me.
Just to give you a sense of proportion, that investing participation rate was 30% back in 1963.
Why you might not be investing
To be fair, times are more difficult for young people today than they were 30 years ago. This is undeniable. It’s harder to land a job that will enable you to be independent. So if you aren’t bringing in enough income it can be next to impossible to find cash to invest every month — I get it.
Another problem is fear. I’ve noticed lately that younger people are more gun shy when it comes to investing than their older counterparts. This is fascinating. You’d think that younger folks would be more willing to be aggressive but that just isn’t the case.
This may be because of the market meltdowns of 2001 and 2008. That double whammy made the 00’s a lost decade for investors — and very frightening for people who had basically no other experience with the market. Many younger people sold out at the bottom of 2008 and haven’t gotten within a mile of the market ever since.
And another explanation of why young people are mostly MIA when it comes to investing is because many have saddled themselves with huge debt. That burden makes investing unthinkable for many.
The case for investing when you are young and broke despite it all
Despite the challenges, investing makes the most sense for young people because they have an ample supply of the most crucial success ingredient when it comes to investing — time. As long as they stay on the sidelines, they squander that precious resource.
Indeed; time is much more important than money when it comes to investing because of the multiplier effect of compounding. During the 19th century the average annual return for the S&P 500 was 6%. That means you’d have 15 dollars at age 65 for each dollar you invested at 18. Clearly, this is a great wealth builder that should not be overlooked — especially by the young.
Despite wars, assassinations, recessions and depressions, the market has done remarkably well and it’s a crying shame when young potential investors don’t tap into that wellspring.
How to get started
If you can find $50 or $100 a month in your budget, you can and should start investing. If you don’t have that scratch — go out and make it by slicing up your expenses and/or getting a part-time job. Now, if you carry high-cost debt or haven’t set up your emergency account yet, you should attend to that first. But once you do, investing should be your laser focus.
Set up your monthly auto pay so your monthly investment comes right out of your bank account and into your investment account without you having to think about it or do anything.
Learn about investing and take your time. But don’t try to master the topic before you start. Stick with broad based ETFs or low-cost mutual funds and don’t get too fancy. Just get going. The good news is that because you aren’t investing that much in the beginning, you really can’t make that bad of a mistake.
Young people have greater challenges when it comes to investing. But that doesn’t have to stop you or a young person you know. Make it happen and force yourself to get started regardless of the amount and learn as you go.
I’ll be honest. My experience tells me that the greatest challenge to overcome is inertia — not resources or understanding.
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