Who are millennials and how are they investing?

Ever wondered what generation you fall into? We take a look at who millennials are – and what this means when it comes to investing.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Hand arranging wood block stacking as step stair on paper pink background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Millennials get a bad press, often being called the ‘avocado toast’ generation. However, they have had to face challenges that no other generation has had to face. So how does this affect how they invest? We take a look at who millennials are and what this means for how they handle their money.

Who are millennials?

Millennials, Gen Z, Gen X? It can all get a bit confusing. According to the Pew Research Center, millennials are those that were born between 1981 and 1996.

Gen Z is typically described as those born in the mid-1990s to 2000s. Which, as you can see, overlaps slightly with millennials. This is mainly because Gen Z are typically the children of Gen X. But they can also be the children of millennials.

There is also a bit of ambiguity as they have similar characteristics. Both grew up in the age of huge technological advancement. So both had the internet from a young age and are confident when it comes to all things digital.

What characterises a millennial?

Millennials are the generation who have been most severely impacted by recession. Many millennials were entering the job market just as the financial crash occurred. They faced record unemployment, which in turn hampered their chances of entering the workplace.

This has had a knock-on effect on their personal finances. They are the generation who are likely to have higher levels of debt, who have struggled to get on the property ladder, and who started their employment journey at a lower level of income.

How do millennials invest?

The sad reality is that mistrust in financial institutions, the effect of a recession and an environment of ultra-low interest rates has knocked the confidence of many millennial investors.

Many consider investing too risky. With other demands on their finances (such as paying down debt) and the nature of the gig economy, millennials have preferred to spend what money they have in the present rather than grow it for the future.

It is also important to note that there is a lack of knowledge and education when it comes to investing for millennials. In previous generations, there just weren’t that many options to choose from. However, the market place is now flooded with a huge range of providers. And there is very little guidance on how to pick the right investment.

In fact, a lot of millennials have chosen to stick with low-yield savings accounts, or have developed conservative investing habits, despite having a longer window to invest and recoup any losses.

What investment strategies could millennials adopt?

If you take a step back and look at the age and the earning potential of millennials, many could afford to take a lot more risks than they think. While many are focused on paying down debt, any savings they do make are languishing in savings accounts that are not earning them interest above inflation.

When it comes to investing, having a long timeline in which to ride out any dips in the market makes a huge difference. Millennials are currently aged between 24 and 39. This means that even the oldest of the generation still have just shy of 30 years before retirement.

While how much risk you take with your finances is personal, if you have a longer runway to grow your money, you can afford to take on a little more. So millennials should maybe consider growth stocks rather than equities, for example.

If you are new to investing, then starting with something like a stocks and shares ISA could be a good idea. Or maybe a share dealing platform like the Barclays Smart Investor. With five ready-made investment funds included so you don’t have to start from scratch.

For more information on online investments, check out our complete guide to online share dealing.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Personal Finance

Note paper with question mark on orange background
Personal Finance

Should you invest your ISA in a model portfolio?

Which model ISA portfolios offer both high performance and low fees? Hargreaves Lansdown, Interactive Investor and AJ Bell go under…

Read more »

Economic Uncertainty Ahead Sign With Stormy Background
Personal Finance

Is it time to exit emerging markets investments?

Investors may well be sitting on losses from emerging markets funds. Is it worth keeping the faith for a sustained…

Read more »

Personal Finance

Share trading? Three shares with turnaround potential

Share trading has been difficult in 2022, but which companies have turnaround potential? Jo Groves takes a closer look at…

Read more »

Man using credit card and smartphone for purchasing goods online.
Personal Finance

Revealed! Why Gen Z may be the savviest generation when it comes to credit cards

New research reveals that Gen Z may be the most astute when it comes to credit cards. But why? And…

Read more »

Environmental technology concept.
Personal Finance

The 10 best-performing sectors for ISA investors

The best-performing sectors over the past year invested in real assets such as infrastructure, but is this trend set to…

Read more »

Road sign warning of a risk ahead
Personal Finance

Recession risk ‘on the rise’: is it time for investors to worry?

A major global bank has suggested the risk of a recession in the UK is 'on the rise'. So, should…

Read more »

pensive bearded business man sitting on chair looking out of the window
Personal Finance

1 in 4 cutting back on investments amid cost of living crisis

New research shows one in four investors have cut back on their investing contributions to cope with the rising cost…

Read more »

Image of person checking their shares portfolio on mobile phone and computer
Personal Finance

The 10 most popular stocks among UK investors so far this year

As the new tax year kicks off, here's a look at some of the most popular stocks among UK investors…

Read more »