Steadfast FinancesGen Y Prefers to Save or Pay Debt vs Invest in Stocks or Real Estate

Over Half of Millenials Would Save Money and Pay Down Debt vs. Invest in Stock Market and Real Estate

Filed in Business Trends , Real Estate 3 comments

For anyone concerned about younger generations — Gen Y/Millenials — having a sincere lack of trust in Wall Street and investing in America’s future, your fears are now warranted.

Based upon Allstate’s Heartland Monitor poll, the spending/saving/investing priorities for Millenials are:

Given a hypothetical $100 to invest, Millennials preferred saving in a bank or paying down debt to buying a home or investing in the stock market.

Saving the money in a bank – 28.9%
Paying off outstanding debt – 26.9%
Buying a house or condominium – 19.6%
Investing in a retirement savings program (like an IRA or 401k) – 16.3%
Investing in the stock market – 8.3%

Pretty huge shift in cultural beliefs! My late Generation X mindset would have been, and still is, I’ll buy $100 worth of Exxon Mobil.

According to Allstate’s poll, the average debt load carried by Gen Y is $22,000 per person, so I can understand they want to be unshackled from their student loans, credit card debt, and no longer be a slave to their stuff as quickly as possible. But still, this is a pretty big shift in thought processes considering that many older American’s (including me) believe the best place to grow your money is to place it in the stock market… not in a savings account.

The only critique I have of this particular question in general is that $100 isn’t all that much in 2010 dollars, so I’m curious if the study had asked what would Millenials do with, say $10,000, instead of just $100. Ten thousand dollars seems like a more reasonable amount to invest, especially when you consider that $100 can barely buy you a week’s worth of groceries or 3 tanks of gas these days.

For additional polling data, checkout Allstate’s press release here and tabulated polling results here (opens to pdf file).

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Posted by CJ   @   12 May 2010 3 comments
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May 13, 2010
2:12 am
#1 moink :

Are you sure this isn’t just a function of age, and therefore financial position? If you think about the steps to financial security, it’s save an emergency fund, pay off your high-interest debt, THEN invest. If you gave me $100 I would put it in my savings account because I only have 1 month of savings there so far as an emergency fund. If you had done so three months ago I would have put it to a debt to my father I incurred during grad school. If you gave me $10,000, I would again put it in the bank, but I’d be a lot closer to having the down payment I’d like sometime in the next couple of years. If you gave me $20,000 I would use it as a downpayment. And nothing is going into the stock market until after that.

May 13, 2010
8:09 am
#2 Matt SF :

That’s definitely possible because I’m sure anyone’s immediate personal finance challenges will trump the need to invest for the future.

But what I find curious is their choice to play it safe and pay down debt, versus *not* take the extra risk with money to invest in the stock market with money that just fell from the sky. To me, that makes a pretty bold statement on Gen Y’s personal finance responsibility, as well as their thought processes where they can get maximum bang for their buck without the fear of having that $100 be worth $50 or $75 one year later.

Perhaps what I found so interesting what that when I was 18-29, if someone gave me $100, and given me the option to invest it or save it, I would have purchased shares of my favorite Buy & Hold Forever stocks. Gives you an idea about the differences in future optimism, servicing existing debt, etc, and I’m just 5 years from the oldest Millenial.

May 13, 2010
9:23 am
#3 asdf :

As a millennial myself, I know why we would rather put our money in the bank, or towards debt instead of the stock market. We’ve seen everyone older than us literally lose tens of thousands of dollars by “gambling” in the stock market. When you’re just starting out, have a good chunk of debt, and have witnessed the greatest stock market crash of the past 70 years, it seems impractical to play the stock market. It makes more sense to pay down the debt you have now (a guaranteed return) rather than risk losing the little bit of money we have acquired in a game of chance, where the rules are decided by a bunch of greedy bankers and wall street brokers. Also a significant number of millennials do not have jobs due to the recession, which hinders them from paying off debt, or building savings.

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