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Millennials Choose Cash—And Why That’s Not So Great

By Kate Ashford
Courtesy of Forbes

Full Article here

Cliff Note Version:

  • 2 out of 5 millenials, 39% prefer cash as their long-term investment.”Millenials actually get the importance of saving; They’re just not willing to take the risks with it, particularly with regard to long-term savings.”
    • Cash is not a good pick for saving/investing money because it loses value over time due to inflation.
    • The S&P 500 has gained 17% over the past 12 months versus 0% for cash.
  • Millenials came of age during turbulent financial times
    • With the financial crisis and tech bubble, young adults had a front row seat to see both events.
    • “Even though it didn’t effect them directly, they saw the impact it had on their parents and other family members and friends.”
  • Millenials have a poor appetite for risk, which is ironic because they are the age group most able to take on risk
    • “Even with something as severe as the financial crisis, if you hung in there and continued contributing throughout, you not only recovered your losses, but you came out well ahead.”
  • Millenials are the generation that most needs to get agressive with savings as they have the biggest retirement savings burden of all time.
    • Young adults “life expectencies are longer, their healthcare cost are going to be higher, they don’t have the pensions thier parents did, and the future of Social Security is more uncertain than its been for any of their predecessors.”
  • Young Adults are going to need a bigger nest egg, and they are not going to get there with cash in a savings account.
    • “A key part of this is getting people to think long-term, getting them to see the power of compounding over those periods of time.”

 

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