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NerdWallet

March 27, 2018, 10:23 a.m. EDT

Millennials are saving, but they’re also making this big mistake

They’re nervous about the risks of investing

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By Andrea Coombes


Getty Images
Rooftoppers take selfies as they sit on the ledge of a high-rise building Hong Kong. Risk is all about perspective.

This article is reprinted by permission from NerdWallet .

A number of new studies indicate millennials are generally doing a great job stashing money for the future. But some of those studies also show that they’re wary about investing those savings in the stock market.

This could hurt them in the long run. Investing in the stock market is a powerful way to grow your money for your long-term goals — more on that below. But first, the good news.

Millennials are indeed saving

Although organizations vary in how they define the millennial generation, it broadly encompasses those born in the 1980s and 1990s. Looking at several studies paints a picture of their general habits:

  • 71% of millennial workers are saving for retirement, either in a workplace plan or outside of work, and the median age at which they started saving was 24, younger than Generation X’s median starting age of 30, according to a Harris Poll conducted for the Transamerica Center for Retirement Studies.

  • Fully 39% of millennials are defined in Transamerica’s survey as “super savers” — they’re saving more than 10% of their salary. That’s close to the 15% experts often recommend.

  • Millennials are on track to replace 78% of their estimated retirement expenses, according to a 2018 Fidelity survey. That’s a healthy rate. (Here are tips to help you figure out  how much you’ll need in retirement.)

  • About one in six millennials have saved $100,000 or more, according to Bank of America’s Better Money Habits survey.

But investing has millennials a little spooked

Now the bad news:

  • 42% of millennials are investing conservatively, compared with 38% of Generation X investors and 23% of baby boomers, according to the Fidelity survey.

  • Millennials held 25% of their investments in cash, compared with 19% of investors overall, according to a Charles Schwab & Co. study of client data.

  • 20% of millennials say their retirement money is invested mostly in bonds, money-market funds, cash or other stable investments, compared with 15% each for older generations, according to Transamerica.

  • 66% of people aged 18 to 29 (and 65% of those 30 to 39) say investing in the stock market is scary or intimidating, compared with 58% of those aged 40 to 54 and 57% of those 55 and older, according to an Ally Financial survey.

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