Reports are suggesting that millennials aren’t making enough money to safeguard their retirement. A study presented by The Guardian suggests that many millennials settle for earning “£8,000 ($10,340) less during their 20s than their predecessors.” Many financial experts feel that young professionals tend to live paycheck to paycheck, leaving them without anything in the bank to fall back on.
Thankfully, there are plenty of options for millennials who are looking for ways to improve their standard of living. One such option is micro-investing, which is a type of investment that only requires small amounts of money in order to accumulate a decent amount of savings by the end of the year.
Micro Investing for millennials
Macro investing works like this: people link their debit card to a micro-investing app such as Moneybox that can collect spare change from card transactions. The spare change is then transferred directly to an investment portfolio.
The idea of micro-investing may not appeal to the short-term investor but think about the exponential growth over the course of ten years’ time. Loose change, when invested correctly, can provide impressive year-end results. When the loose change grows over 10-years, millennials can then use the proceeds as capital to fund new investments.
What makes micro investing so great is that the funds accumulate without the person knowing it. For example, when you pay $3.60 for a burger at a restaurant, a micro-investing app can round up the total of the purchase amount and invest the change – in this case, 40 cents. When you think about how many times you buy coffee in a week, purchase food, and pay for a train or bus ride, investments can amount to hundreds in the first two months. Micro-investing allows millennials to invest over time without the hassle.
Why aren’t millennials investing?
One of the main reasons why millennials don’t invest their money according to experts is because of the idea that investing requires a lot of money. Pair that with investment jargon that’s hard to understand, analyzing graphs every day, and the thought of losing thousands for depreciating stocks, and this all contributes to the millennials being put off due to them being misinformed when it comes to investment practices.
Despite this mindset, however, millennials can succeed in investing when presented with the right resources. An article by FXCM entitled ‘Forex Trading For Millennials’, for example, contains solid information about Forex trading, which is quite easy to understand. Use this knowledge along with Forex apps that alert individuals about real-time trading and millennials can learn how to invest easily. Millennials are generally digitally savvy, and the resources are easily available for them online.
“One of the primary challenges the industry faces is reigniting the savings culture by making it easy for people to save very small levels of money frequently,” said Carol Knight, the Operations Director of Tax Incentivised Savings Association (TISA).
TISA is a group who are dedicated to selling savings and investment products. They recently started an initiative to improve the financial wellbeing of millennials who are living in the UK. TISA conducts its business with asset managers, banks, and insurance companies.
Small but awesome
Financial companies have acknowledged the power of micro-investing. Blackrock, which is currently the world’s biggest asset manager, has shown interest in micro investing recently. The company, which have $4.5 trillion in assets, have taken an interest in micro investing because studies have shown that 80% of the UK’s millennials don’t regularly save due to them not having any extra money left over after getting their paycheck. The studies are backed up by The Money Charity, which says that around 9.7 million households in the UK alone have no savings at all. If people aren’t saving, then they aren’t investing, and that becomes a problem for companies in the business of selling funds.
Blackrock, in response to micro-investing, offers an investment called BlackRock Micro Cap Fund, which is an open-ended diversified equity growth scheme.
Summary
Micro-investing is an investment vehicle that’s perfect for showing millennials the benefits of saving. As aforementioned, there’s no real capital needed to make micro investing work, which means literally anyone with a credit card can start to use micro investing as a viable platform to begin saving. By saving loose change over time, millennials can use micro investing as a starting point to saving capital for other investments geared to their long-term goals such as stocks, and retirement
funds.
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