Save and Invest...Or I'll Wash Your Mouth Out With Soap!
I don’t believe young people are disinterested in saving and investing. I do, however, believe they aren’t terribly interested in investing for retirement, a time in their lives that they view as a “a million years” down the road.
Early in this blog’s short life, I made clear that my focus would be on the younger crowd - Millennials and Gen Zers. Mostly because we are often negligent in teaching our youngsters even the basics of personal finance. I consider that a significant oversight… a shortcoming of our education system. And in reviewing my own blogs during the past year, I, too, have been somewhat remiss of the younger folks despite my good intentions. I plan to do better starting today.
Million Years Away
I don’t believe young people are disinterested in saving and investing. I do, however, believe they aren’t terribly interested in investing for retirement, a time in their lives that they view as a “million years” down the road.
“Right now, there are better places to spend money than for retirement,” a young person might argue. “I’ll worry about that later.” A perfectly understandable stance at age 15… or 20… or 30…or 40… well, maybe not 40. But then come comes along a mind-boggling, scary situation like the COVID-19 chaos the world is currently experiencing and it reminds us all - young and old - that saving (period) is key and it's best to start at a young age.
But if nothing else, market corrections and other unanticipated surprises should, at the very least, remind our younger folks of the value of “rainy day” funds – something we should all contribute to before heading down the road to building a retirement portfolio.
There are major challenges involved in attracting a young person’s attention to the world of saving and investing. Here are some common reasons for NOT dipping a toe in the investment pool:
1. I have a decent job. I still have virtually no money left over to enjoy life, much less save for retirement.
2. I’m just not all that interested in saving money right now.
3. I don’t know the first thing about investing.
4. I don’t have the time to learn how to invest.
5. Investing in the stock market is scary. If I have any surplus cash, I don’t want to lose it gambling on stock.
6. I don’t have enough money to properly diversify my investments.
7. Buy mutual funds… what are those?
8. I’m young - I have plenty of time to plan for my retirement.
9. I have a couple of bad habits that are hard to break. I’ll work on those down the road.
Etcetera, etc., etc.
Worth the Investment
My intent is not to be preachy or critical of other folks’ habits and objectives. My purpose is to convince young people to develop the discipline to save and invest early in life. And to accompany that discipline with the patience and fortitude to avoid joining the ever-present herd of panicky investors. This discipline… this patience… will serve them well throughout life.
And once The Amazing Power of Compounding and an ever-dynamic American stock market begins to reward those ingrained habits, leave that growing retirement fund alone! It’s resilience will be amazing. Yes, there will be setbacks along the way, but that’s why patience is so important. Market corrections like COVID-19 and the Great Recession are part of the deal. Accept that fact and keep on truckin’. Over a lifetime, the trendline will be ever upward. Count on it.