Are we there yet? Is a catchy phrase for kids who weren’t around in the 70’s and can get away with whining without suffering the consequences. It must be nice to be bad and get away with it. Does the same apply to youngsters when they fail to invest? Since April is financial literacy month, our editor thought that it might be great to write a little something, something, about it and tie it into Millennial, Generation Y, and Generation X investing (or lack thereof).
In 2000, The Jump$tart Coalition for Personal Financial Literacy began promoting April as financial literacy for youth month. In March, 2004, the Senate passed Resolution 316 that officially recognized April as National Financial Literacy Month. National Financial Literacy Month is recognized in the United States in April in an effort to highlight the importance of financial literacy and teach Americans how to establish and maintain healthy financial habits. Unfortunately, the bankers, lenders, and Wall Street executives never got the memo; because four years after this Congressional resolution, we had the biggest financial met down in almost a century.
Which brings us to the point of this discussion (you thought that this was a blog; shame on you) Are we investing, yet? Here’s the good. According to the Investment Company Institute, a non-government think tank whose mission is, among others, to promote public understanding of mutual funds and other investment companies; world assets invested in mutual funds is estimated to be $23.8 trillion (based on the 2012 Report for 2011), and mutual funds represent the most common investment holding vehicles for most people. Mutual funds are the funds that hold the money that is placed into our retirement plans, and 44% of the households in America own mutual funds. The median asset value is $120,000. Now, for the bad. If only 44% of the households own mutual funds, what is the other 56% doing? Real Estate…yeah right!
One of the major concerns for Americans, presently, is having enough money for retirement. With median mutual fund assets totaling only $120,000, common arithmetic tells us that this is a problem. How long could you survive on $120,000? The statistics become more daunting once one realizes that only 32% of income earners younger than the age of 35 own mutual funds. Since mutual funds represent the bulk of any retirement plan, especially one that is owned by someone younger than 30, it is safe to assume that these youngsters are not putting any money away for retirement. Why should one not wait until their 40’s to get serious about investing? Take a look at these two examples:
If a 25 year old millennial begins investing just $150 a month for 40 years, and averages 7% (this is still very possible with an indexed strategy) on their investment, they will have about $341,542 at age 65.
A 40 year old Generation X’er who invests $300 a month for 25 years, and averages the same 7% on their investment, will only have about $189,575 at age 65.
I think you get the message. There’s even ways to get what they call free money (if such a thing exists) from employers. It’s called matching contributions. Many people can get an extra 5% – 10% contribution to their retirement plans from their company. Ask your Human Resources representative if your company offers matching funds. If you are self- employed, you even have the advantage of writing off every dime that you put into your retirement plan. So, stop waiting, and start investing!!!
By Walter Hines
Financial Editor
ReelUrbanNews.com
Contact Walter Hines @ BISON BUSINESS & TECHNOLOGY SOLUTIONS, LLC
Walter@bisonbiz.com
