Millennials Are Not Investing in the Stock Market—But Might Want to

March 07, 2018

Despite the fact that I head up a research center at the St. Louis Fed on family wealth, my three risk-averse millennial children will not heed my free advice to invest some of their hard-earned savings in the stock market.

So they save—first because I made them, now because they want to—in online savings accounts, while my wife and I save overwhelmingly in our retirement accounts and the 529 college savings accounts we have set up for each kid’s college education.

Not surprisingly, our kids’ returns have been abysmal, while my and my wife’s returns (through well-managed target funds) have been fabulous.

Three in Five Millennials Lack Stock Market Exposure

Open Vault millennials saving


Analysis indicates that millennials are on track to have less wealth than previous generations. How can they compensate? 

My wife and I were willing to take some risks, while my kids were not. That’s understandable when one doesn’t have much savings or wealth to begin with.

What’s true for my kids is also true for the nation: the vast majority of Americans have no real stake in the stock market. According to my Center for Household Financial Stability colleague Lowell Ricketts, the wealthiest 10 percent of households own 83 percent of all stocks.

Further demographic analysis by Ricketts shows that stock ownership is highly concentrated among households that:

  • Are white, non-Hispanic
  • Are headed by someone with at least a four-year college degree
  • Had a parent with at least a four-year degree
  • Are middle-aged or older

As you can see, millennials are not on that list.

In fact, additional analysis by Ricketts shows that about three in five millennials have no direct or indirect exposure to the stock market. Also, the holdings of the two in five who do have exposure are currently low (about $7,600 at the median) relative to the preceding generation (Generation X) at the same age.

Enough to Lead the Life They Want?

Now, those facts may not be surprising, given that millennials are, well, young. But my colleagues Bill Emmons and Bryan Noeth also found that younger Americans today have significantly less wealth than their parents or grandparents did at a similar age. (See the PDF “Age, Birth Year and Wealth,” an essay from the St. Louis Fed’s 2015 publication, The Demographics of Wealth.) 

In fact, they found that an American born in 1970 is likely to have 40 percent less wealth over their lifetimes than someone born in 1940. Ouch.

So, it’s a good thing millennials have Social Security to count on, right? Well, they don’t think so:

  • The Transamerica Institute found that 81 percent of millennial workers are concerned that Social Security will not be there for them.
  • The Pew Research Center reports that 51 percent of them expect to receive no benefit at all.
  • The Peterson Institute finds that more of them believe in UFOs than in Social Security’s future.

Despite all this, Pew also reports that 85 percent of millennials say they already have or will have enough resources to “lead the kind of life they want.” Not surprisingly, then, Pew finds that millennials perceive their financial prospects to be favorable even in the face of evidence to the contrary.

Just So We’re Clear

This means that:

  • Three in five millennials have no stock market exposure and are thus missing out on all that growth.
  • They are on track to have less wealth than previous generations.
  • They don’t think Social Security will be there for them.
  • Yet, they are optimistic about their future finances.

I love the confidence of my kids and their generation, but sometimes it worries me.

Long Investing Horizon = Time to Realize Stock Gains

How should millennials compensate for this? As hard as it may be for them to do, it seems like more exposure to the stock market must be part of the answer.

Despite the recent volatility, current and historical gains remain really impressive—and millennials certainly have the long time horizon necessary to realize those gains. Ideally more of them would invest through an employer-sponsored retirement account—if, of course, they’re lucky enough to have both an employer and one that offers a retirement plan.

And 529 plans would be great, too. These tax-advantaged savings plans are not just for college, but for what experts say is even more critical: lifelong learning.

Ideas to Explore: Retirement Savings, Easing Burdens on Students

We can’t just pin this all on millennials; policymakers could consider a few measures, as well. 

One would be to explore and possibly expand retirement savings policies (such as “Secure Choice”) that several states, including Illinois, are pioneering for residents who lack access to a workplace retirement plan. Secure Choice programs generally work by automatically enrolling private-sector employees who lack access to employer-based retirement benefits into state-facilitated individual retirement accounts.

Another would be to look into efforts to lower tuition and student loan burdens, so that millennials actually have more money to save and invest.

Consider Roth IRAs and 529 College Savings

Open Vault 529 plan piggy bank


An early start: Opening Roth IRAs and 529 college savings accounts at birth is one way to responsibly expose kids to the stock market, says author Ray Boshara.

For future generations, let’s consider a Roth IRA at birth for every child born in America, perhaps modeled on the federal Thrift Savings Plan government workers presently enjoy. Or, do for every kid what my wife and I did for our kids: open up a 529 college savings account when kids are born.

Both of these ideas—Roth IRAs and 529s at birth—would be responsible ways to expose kids and eventually all Americans to the stock market. Doing so also would set them on a path to post-secondary education (whether technical training, community college or a four-year degree) and a more secure retirement.  

So, I’m going to keep trying to get my kids to invest. Let’s hope that they realize, unlike I did at their age, that Dad is sometimes right.

Additional Resources

For more information on 529 college savings accounts and Roth IRAs, see:

For additional reading on stocks and saving, see:

About the Author
Ray Boshara
Ray Boshara

Ray Boshara is a former senior advisor and assistant vice president of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. He is also a senior fellow in the Financial Security Program at the Aspen Institute.

Ray Boshara
Ray Boshara

Ray Boshara is a former senior advisor and assistant vice president of the Institute for Economic Equity at the Federal Reserve Bank of St. Louis. He is also a senior fellow in the Financial Security Program at the Aspen Institute.

This blog explains everyday economics, consumer topics and the Fed. It also spotlights the people and programs that make the St. Louis Fed central to America’s economy. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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