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4 Investing Habits for Millennials
A surprising amount of millennials don’t have adequate habits to invest money, and most don’t know how to start.
This generation is unique in how they view money, investing, and debt. The following article will dive into why this generation doesn’t favor investing, the millennial mindset around finances, and how to start investing!
It is important for millennials to have the following 4 habits:
- Don’t be afraid of the stock market
- Educate yourself about investing
- Establish the habit of delayed gratification
- Utilize the power of microinvesting
1. Don’t Be Afraid of the Stock Market
In 2008, Americans were hit with the “Great Recession”. This caused problems with the housing market, job losses, and lots of fear.
The Great Depression has been many decades back, and, honestly, we’ve forgotten all about it.
For the majority of the young today, that time was so long ago, and very few know many details about it at all! With the passing of a number of years, and a new growth of trust in the stock market, people began to forget about the devastating effect that this period of time had on America.
Make sure to learn about the current stock market, written for beginners in mind!
However, when the recent recession hit about 10 years ago, it made many adults question their trust in investments.
Current millennials are around the ages of 18-35. Counting back 10 years and we are now talking about how millennials experienced the Great Recession at the ages of about 8-25.
As a child, watching parents lose jobs, fear for the future, and a large amount of uncertainty instilled in the minds of many young people that the stock market is not to trust.
If you are a millennial yourself, you may remember sacrifices your parents had to make during 2008, and the many months following for the economy to slowly recover.
For many millennials, this meant:
- Less vacations and money spent on leisure
- Less money spent going out to eat
- Not buying homes or new cars
These are all things that are actually taught to people today who are working toward paying off debt and becoming financially free! This scary time made a unique impact on millennials, as they have greater uncertainty regarding the stock markets and investments overall.
If the economy is so unpredictable and can ruin lives, why bother with it? Is it smarter to just keep the money in the bank instead?
2. Educate Yourself About Investing
It is imperative for millennials to establish the habit of learning often.
Net Worth
To begin, everyone should know their net worth!
With the ever-growing amount of student loans, and without knowledge of how to track spending, so many people are walking around unaware of how much money they have to their name, and what they could even be doing with it!
It’s amazing what you’ll feel once you put a dollar sign to yourself. Do you know how much money you owe before you could call yourself debt-free?
My absolute favorite way to track spending, anticipate future retirement, plan a budget, and analyze net worth is through an awesome FREE program called Personal Capital.
If you have any desire to reach financial independence, get out of debt, build a side hustle, or even plan for retirement, you need to be tracking your net worth!
Your net worth includes:
- All liquid money in your checking, savings, and/or other money accounts
- Retirement accounts such as 401(k)’s and IRA’s
- Student debt
- Mortgages and other liabilities
- Health savings accounts
- …and many more!
How to Learn About Investing
Traditional school in America does not adequately cover personal finance. Many students leave high school without knowledge of how to budget, manage money, or even know basic investing terminology!
It is scary to think that kids today embark to college, in which they may accrue over $100,000 of debt, without any background or knowledge of how to track their money, save money, and an idea of how they will pay off that money.
Let alone think about the fact that masters and professional degrees are becoming much more desired, creating an additional mountain of student debt for many young adults.
It is hard to find a millennial who doesn’t have student debt!
And yet, with the high interest rates and unguaranteed jobs after graduation, many are finally realizing they need to do something about their financial situation.
Not knowing what they’re doing with their money makes it extremely difficult to invest. Why put your hard-earned money into a system that made your family have to go through hard times? Why put that money away if you don’t even understand how that system works in the first place?
It’s tricky talking retirement and investing to many millennials due to this mindset.
3. Establish the Habit of Delayed Gratification
The American culture is heavily focused on appearances.
Keeping up with the Joneses has never been so apparent, and it has affected the millennials significantly, in comparison to older generations. With the addition of social media, young adults are faced with feeling the need to spend more money to feel more important.
Unfortunately this mentality makes the idea of putting tons of money away for decades seem terrible!
Imagine asking a 20-year old, female student whether she would be interested in spending $100 on new clothing or to put it in a Roth IRA. To be honest, you may get a strange look with the words “Roth IRA” even being said.
If she chose to invest $100/month, rather than spending it on materialistic goods, the amount of money she could have later in life would be significantly more.
The “right now” habit is getting short-term satisfaction for making purchases to make you happy in the current moment.
As discussed in other articles, and heavily promoted in Dave Ramsey’s Total Money Makeover, this habit makes a huge difference regarding self-control with money.
To keep fueled, you must keep spending. This could be morning coffees, clothes, going out to eat, or even house décor.
The idea of setting aside money doesn’t sound fun, right? Why do that when you could spend it now on things you need? Your money is just fine where it is in a bank, right?
Unfortunately, this worldview is habit and affect’s a millennial’s potential for investing.
The journey to financial freedom and paying off debt is all about creating new habits due to the engrained habits that millennials have regarding money.
What’s great is that is just takes the right guidance and continual motivation to change those thoughts around money and to make a significant difference in one’s financial situation!
4. Utilize the Power of Microinvesting
With the fear of the stock market, and without proper education, millennials are just keeping their money in their savings and checking accounts! Yet, if you’ve read up to this point, it all makes sense!
It is easier and more comfortable for this generation to just accumulate money in their bank accounts than to set is aside in an unknown place.
With this in mind, I highly suggest you start looking into microinvesting! Microinvesting is the new way for people to invest – without the hassle of using financial advisors and spending thousands of dollars!
It allows people to get into the stock market FAR sooner, because you can spends just a few cents or a few dollars at a time.
With this said, it would be smart to build a habit of investing on a schedule. For example, I microinvest every other week (since I get my paycheck at that time). I simply set aside money in my budget to invest!
If you’re interested in learning how to budget to be able to invest, come learn about the 70/20/10 budgeting rule!
How Can Millennials Begin Investing?
#1. FIND WAYS TO MAKE EXTRA CASH
I discovered survey sites awhile back and have been able to make a handful of extra cash to save up for expenses.
Now, this won’t pay for all your bills and expenses, but being able to pay for things like birthday gifts or an electric bill by simply filling out surveys is pretty awesome!
I know of people who use dozens of survey sites, but I only stick to two. (Honestly, I just don’t have a ton of free time.)
I have a step-by-step article here about how to start with one of my favorite sites!
If you want to double your earnings, check out both of my two favorite apps:
Some extra dollars will always be helpful, and it will be smart to keep on earning after achieving financial freedom, too!
#2. Get an Investing App
I use a popular free app called Acorns to set aside money for an investing savings fund.
Acorns works by linking to your bank and helping set aside “cents” to a savings account after you make purchases.
It’s a really neat way to save up money without even thinking about it – and you could literally save up hundreds in a year!
If you’re interested in checking Acorns out, go get your free $5 credited to your account here!
#3. KNOW YOUR CREDIT SCORE WELL
Understanding your credit score is a critical part of understanding your personal finances and starting your investing journey!
My best piece of advice for millennials is to know your credit score before starting to rack up debt. Then, regularly check it using an app that won’t affect your score.
I use Credit Karma, which I’ve loved for years! Not only is it free, but checking your credit score through them won’t make any difference on your score (unlike some other services out there!).
#4. TRACK YOUR SPENDING!
For starters, to begin investing, you need to start tracking your expenses and income!
As mentioned above, I use a free, beginner-friendly platform called Personal Capital, but any will do!
Once you input your assets and liabilities, you’ll have an idea of your net worth. This is an important step for this process!
You can then set up a budget and track all of your expenses!
Check out my full review of this free app here!
Ready to start your financial journey? Learn more!
