The Generational Investing Gap: Why Fewer Young People Put Their Money to Work

When I was a child, my grandmother incentivized me to drink milk by paying me $0.25 per glass, hoping I would grow up strong and healthy. Not only did I reach 6’3″ in height, but I also learned valuable lessons about money and investing. Determined to earn as many quarters as possible, I saved diligently. By the time I was 13, my grandmother could purchase a $1,000 savings bond in my name—a bond that matured in 2021. From that moment on, I was hooked on investing and eager to learn all I could.

My grandmother always hoped I would become a “stockbroker,” as she had a deep passion for investing herself. She lived long enough to see that dream realized when I landed my first role in finance at Salomon Smith Barney in 2001 as a junior investment associate. Though we lost her in 2006, I know she was with me in spirit when I passed the CFP® exam in 2024. Her unwavering belief in me and the financial lessons she imparted have had a lasting impact on my career and financial philosophy.

A Generational Shift in Investing Behavior

Fast forward to today, and I see a stark contrast in how younger generations approach investing. My two college-age daughters are among the hardest-working individuals I know. My oldest is set to graduate from nursing school in July, while her younger sister has two more years before earning her teaching degree. I’m incredibly proud of their dedication to their studies and jobs.

However, despite my persistent efforts to teach them about investing, neither has shown much interest. This reluctance surprises me, given the crucial role investing plays in helping create financial security. Unfortunately, their hesitation reflects a broader generational shift, as younger people today invest at significantly lower rates than previous generations.

Investing has long been a cornerstone of wealth-building in America. Past generations embraced the stock market, real estate, and other asset classes as essential tools for securing their financial futures. So why are fewer young people investing today? Several factors contribute to this growing generational gap.

Key Reasons for the Decline in Young Investors

1 – Economic Pressures and the Rising Cost of Living

One of the most significant barriers to investing is the financial strain younger generations face. The cost of living has risen dramatically, with soaring rent, home prices, healthcare costs, and student loan debt consuming a substantial portion of their income. As a result, many young adults prioritize covering basic expenses over investing for the future.

Moreover, wage growth has not kept pace with inflation, making it harder for young professionals to accumulate savings. Living paycheck to paycheck, they often view investing as a luxury rather than a necessity.

2 – Lack of Financial Education and Trust in Markets

Another critical issue is the lack of comprehensive financial education. Many young adults graduate from high school or college without a strong understanding of budgeting, investing, or retirement planning. Unlike previous generations, who often learned financial literacy at home or through workplace pensions, today’s youth must navigate complex financial decisions independently.

Additionally, events such as the 2008 Great Recession and the market volatility during the COVID-19 pandemic have fueled skepticism. Many witnessed firsthand how market downturns wiped out years of savings for older generations, leading to a deep mistrust of traditional investing.

3 – Changing Financial Priorities and Values

Millennials and Gen Z often prioritize experiences over wealth accumulation. Rather than focusing on building investment portfolios, they allocate their money toward travel, social causes, or entrepreneurial ventures.

Furthermore, the traditional trajectory of working for decades, saving consistently, and retiring at 65 is less appealing to many young professionals. They seek greater career flexibility, gig economy opportunities, and financial independence at an earlier age. This shift in priorities leads some to favor short-term liquidity over long-term investing.

4 – The Rise of Alternative Investments and Risk Aversion

While fewer young people participate in the stock market, many are exploring alternative investments such as cryptocurrency, real estate crowdfunding, and side hustles. These avenues may offer more control but often come with higher risks and volatility, making long-term wealth accumulation more challenging.

We believe traditional investment strategies—such as diversified stock portfolios and retirement accounts—remain some of the most reliable paths to financial security. However, risk-averse young investors may prefer holding cash or seeking non-traditional investment methods.

5 – Limited Access to Employer-Sponsored Retirement Plans

Previous generations benefited from employer-sponsored pension plans, making retirement savings more accessible. Today, pensions are rare, and many young workers lack access to employer-sponsored retirement accounts like 401(k) plans. Even when these plans are available, some younger employees do not fully understand their benefits or feel financially unable to contribute.

Policy changes related to student loans, housing affordability, and tax incentives could significantly impact young people’s ability to invest. Without stronger financial support structures, investing may continue to be deprioritized.

Bridging the Generational Investment Gap

Closing the generational divide in investing requires a multi-faceted approach. Younger generations face unique financial challenges, and encouraging them to invest will take financial education, improved accessibility, and a cultural shift toward long-term wealth-building. Here are some key strategies to bridge the gap:

1 – Strengthen Financial Education and Early Exposure to Investing

• Schools can integrate personal finance courses covering budgeting, investing, and retirement planning.
• Employers need to offer financial wellness programs to educate young professionals about 401(k)s, tax advantages, and investment strategies.
• Digital tools like interactive financial planning apps can make investing more accessible and engaging.

2 – Encourage Small, Consistent Investments

• Fractional investing allows young investors to buy portions of stocks and ETFs without large amounts of capital.
• Micro-investing apps that round up spare change into investment accounts provide an easy entry point.
• Real-life examples demonstrating the power of compound interest can help young investors see the long-term benefits of starting early.

3 – Expand Access to Employer-Sponsored Retirement Plans

• Policymakers can advocate for automatic enrollment in 401(k) plans and increased employer contribution matching.
• Retirement benefits should be extended to gig workers and freelancers through SEP IRAs or SIMPLE IRAs.
• Roth IRAs need to be promoted as an attractive tax-free growth option for young investors without employer-sponsored plans.

4 – Address Market Skepticism and Mistrust

• Educating young investors on historical market trends and long-term returns can build confidence in investing.
• Promoting diversified, low-cost investment strategies such as index funds and ETFs can help mitigate risk concerns.
• Encouraging financial independence through long-term investing can shift mindsets away from short-term fears.

Final Thoughts: A Path Forward

While younger generations may be investing less than their predecessors, this trend is not irreversible. By improving financial education, expanding access to retirement plans, and shifting cultural attitudes toward investing, we can empower young investors to take charge of their financial futures.

The lessons my grandmother taught me about investing remain as relevant today as they were decades ago. I hope my daughters, and young people everywhere, will recognize the value of investing early and often. With the right knowledge and resources, they too can help build financial security and lasting wealth.

This is intended for informational purposes only and should not be construed as personalized financial advice. Please consult your financial professional regarding your unique situation.