I was never taught the importance of investing money when I was in school. And, while my degree in Political, Economic and Social Sciences offered a vast array of useful insights about the world around me, I was very much focused on saving. I didn’t realise that by leaving it sitting in the bank, my money was actually losing value. It was this realisation, combined with the trigger of moving overseas, that altered my thinking and prompted me to research a world I once thought was not for me. It’s important to note here that I wasn’t in any debt and I had savings.
While it’s crucial to tick these things off first, it’s equally important to recognise the unseen, silent barrier of peoples’ preconceptions. We’re told that the shift from a saving mindset to an investing mindset is one of the most important financial stages that a young person can go through. As a Millennial and a woman, I’d agree. My priorities, financial habits and future prospects – thanks to compound interest and starting early – are truly being shaped by having overcome barriers and taken that first step.
The obstacles that prevent young people from taking the leap into the investing world vary. But in many cases they tend to be a range of comforting ‘truths’ to support emotional beliefs which ensure familiarity bias persists and no action actually gets taken. For example, I used to believe it just wasn’t for me and I would rationalise this by thinking ‘It’s for wealthy, older people’. I would also always tell myself I didn’t have time, easily evidenced by the ‘fact’ that ‘It’s too complicated’. It’s true for any outsider looking in; the industry’s use of complex language to describe foreign-sounding products – and its apparent attraction only for people au fait with the jargon, the risks involved and the way it all works – gave me all I needed to perpetuate my beliefs. But these are dangerous conclusions drawn from observations from a far, at a safe distance away without little tangible experience making investing easy to rule out on principle. They’re also unseen barriers which can form an enduring inertia and generally perpetuate an overhyped image in people’s minds. But it’s important to get over them as quickly as possible.
According to Investopedia (2019), if a 20-year-old invested $10,000 it would have grown to $70,000 by the time they were 60. However, if these unseen barriers had made our investor wait until they were 30 (you’re an adult then, right?) that same $10,000 would only have become $26,000. Of course, $10,000 is a huge sum for a first investment – especially when you can invest as little as £1 with the likes of Nutmeg or Wealthify, but the point remains; time is one of the most plentiful assets young people have. There’s a big monetary cost for not taking that first step early.
If the lure of greater monetary value doesn’t get people investing, perhaps FOMO will. There has been a sharp rise in Millennial and Gen Z investors globally. On a UK level, Gen Z and Millennials subscribing to Stocks and Shares ISAs are up 92.3% between 2016/17 and 2017/18 (Edelman, 2020). Large life events such as coronavirus, or in my case moving overseas, usually spur a change in behaviour and habits. A recent study by Finder.com found that 3 out of 4 Millennials and Gen Z young people said that they were planning to invest within the year – a quarter of them citing the pandemic as the trigger for doing so. (This is Money, 2020)
For me, it’s not surprising to see an increase in younger, digitally savvy investors. Especially as the Gen Z group are much more DIY in attitude – growing up with the likes of YouTube and TikTok – and because investment companies and FinTechs have worked hard to make investing easier, less complex and suited to the individual. It’s going to be interesting to see how quickly these companies begin to turn their attention to young people, particularly as that £5.5tn UK wealth transfer starts distributing wealth from the Boomers to a younger, more female profile group with longer-term goals-based ideals and a greater focus on non-financial risks such as climate change. But that’s another discussion.
For my Millennial friends out there that are not yet investing because of an overhyped perception of what the investment world could be like, I urge you to take that first step sooner than later. It’s not as scary as it seems; you can be as hands-on or off as you want and you can control what your money’s invested in. I know you’ll kick yourself in 10 years’ time if you don’t.