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It’s understandable that the volatility and current state of the financial markets has alarmed many people. However, it’s important to remember that volatility and market sell-offs also present an opportunity for investors. It is well understood that, over time, stocks provide the best way of building wealth.  However, a smaller share of the American people own stocks. The lack of stock ownership is widespread but is especially troubling among young people.


In 2019, Charles Schwab’s Modern Wealth Survey found that fewer than one-third of young people are saving money in a 401(k) retirement plan. Furthermore, less than 1 in 5 of them have an investment account. However, it’s not just the younger generation who aren’t saving. Almost half of all Americans don’t own any stock.  This figure represents a decrease as the great recession had a major impact on people’s views on owning stocks.


So why aren’t more people investing in stocks to help achieve their long-term goals?


It can be argued that the younger generation is far more limited in the financial means they have available to set up an investment account. It’s very common, and in many cases a crisis, for a college graduate to have a large amount of student loan debt. On average, student loan bills are approximately four hundred dollars a month.  This level of debt can severely impact the ability to start off on the right path. In fact, by the age of 30, students that graduate without debt can have double the amount saved for retirement as those who do have debt. 


Many people who do save or invest aren’t able to save 15 percent of their income, a target that many financial professionals recommended.  But that figure is just a target. Any amount to start helps. If someone then automates that investment by moving money automatically from a paycheck or checking account, they increase their odds dramatically of having a successful savings and investment strategy.  It’s estimated that 20 percent of people under the age of 40 are investing less than one hundred dollars a month and 10 percent of them aren’t investing anything at all.


Another challenge is the age-old conundrum of immediate needs/gratification versus delayed benefits/satisfaction that are often years if not decades down the road.  Investing or saving money directly, meaning before someone has the chance to spend it, has been shown to be a key ingredient in a successful savings strategy. Successfully saving for one’s future requires discipline and diligence.  Strategies such as automating your savings go a long way to getting people to a positive outcome and can overcome the short term challenges of getting started.


The reason the lack of savings and investing by young people is so troubling is that it wastes their greatest asset, time.  Time to let the financial markets work for them. Time to amass a large and growing sum of money and lastly, time to take part in one of the greatest tools for building wealth, the compounding of money over time. 


Regardless of age, taking one’s personal finances seriously is critical for a secure life. Everyone should take their personal finance seriously.  There are plenty of resources, many of them free, that will help people start on the successful path of savings and investing for their future. 


Securities and Investment Advisory Services offered through Essex Financial Services, Inc., a Registered Investment Advisor, Member FINRA, SIPC.  A subsidiary of Essex Savings Bank. The securities and insurance products offered through Essex Financial Services, Inc. are not a deposit of, or other obligation of, or guaranteed by any bank, or an affiliate of any bank, are not insured by the FDIC or any other agency of the United States, the Bank or an affiliate of the bank and involve investment risk, including the possibility of a loss of the principal amount invested.