Studies have shown Millennials tend to shy away from investing, and researchers have linked this behavior to everything from the 2008 financial crisis to a lack of financial wherewithal.
But a recent survey sheds new light on what might actually be going on: they don’t think they have enough money to start.
Almost half (46 percent) of Millennials aren’t investing outside of a 401k account, according to the latest research from Twine, a John Hancock-backed savings and investing app. The same amount (46 percent) are under the impression that $1,000 is the least amount of money required to start investing. Another 17 percent believe a person would need $10,000 to begin.
It’s an interesting misconception, especially since Twine’s data show most Millennials have a pretty solid understanding of finance.
“Survey respondents were asked to answer basic questions about investing, such as the differences between high- and low-risk investments, and how bond and interest rates are related. Forty-four percent of millennials scored a passing grade on the investing pop quiz,” Twine noted in its report.
Study results instead suggest that “there may be a false sense of intimidation around what it takes to start investing.”
In an era where technology makes almost all things possible, the reality is consumers can begin investing with a small amount of money. Online platforms, such as Betterment and M1 Finance, along with apps like Twine and Stash, allow users to invest as little as $5.
Certificates of deposit (CDs), money market accounts, IRAs and, of course, 401ks are other low- to no-minimum investment vehicles that can be used to grow funds faster than most savings accounts. Consumers should consider fees before handing over their money, however, to avoid unpleasant surprises.
“The next step is shifting the mindset around investing by starting with small changes in behavior—it doesn’t take a financial advisor or a large sum of money to get started. There are many entryways into investing that can help people grow their wealth and meet their financial goals, regardless of prior knowledge, current net worth or previous money missteps,” Uri Pomerantz, CEO of Twine, said in a statement.
In addition to exploring the youth’s hesitance to invest, additional key findings of the study showed:
- There may be a correlation between being open about money and being more financially savvy. Those who talk about their finances and investing are more likely to be investing themselves. Millennials are the most likely generation to go to their friends for financial advice, and nearly 80 percent of all respondents who are currently investing outside of a 401k talk to their friends about their finances.
- While Millennials are motivated to reach their financial goals, they’re distracted by impulsive spending like vacations and shopping. More than twice the number of Millennial respondents indicated they are distracted from their financial goals by spontaneous weekend trips with friends or clothes and jewelry shopping than their Gen X counterparts. Rather than changing their investing or savings approach to meet financial goals (and avoid these distractions), respondents indicated they are looking for quick fixes—18 percent said they would be willing to start a side hustle to meet a goal and 23 percent would work overtime.
- Despite ample technology available to start investing, people are missing out. More Millennials rely on basic web search for financial information, trusting the internet as one of the most valuable sources over friends or a robo-advisor/financial app. Moreover, Twine’s previous #RelationshipGoals survey indicated that 49 percent of millennials are using a robo-advisor to save or manage money, but this most recent survey found only 16 percent are using a robo-advisor to invest—suggesting they’re hesitant to take the extra step to invest via technology.
Jessa Claeys is a writer, editor and graphic designer.
