Millennials feel overwhelmingly confident in their own ability to use financial products—including common investment vehicles, such as stocks (66% say they’re confident) and even some more complex options, like private equity (47%), according to the Bank of the West 2018 Millennial Study.

Millennials also have age-appropriate attitudes towards asset allocation, with 66% agreeing that the more time they have until retirement, the more aggressive they can be with their investing strategy. However, they are reluctant to actually invest, saying they feel safest keeping most of their savings out of the market (66%). They are spooked by the financial crisis, with 65% saying living through that period has made them a more conservative investor. This reluctance to invest is demonstrated by their under-utilization of investing accounts that could help them build wealth and prepare for retirement: just 40% have taken advantage of common workplace retirement accounts like 401(k)s or 403(b)s; only 23% have opened an IRA or Roth IRA; 14% have a managed account; and just 12% have a brokerage account.

“Many Millennials suffered in the wake of the financial crisis. They were the victims of poor timing—graduating into an extremely difficult job market, with many missing the past decade of the market rally and buying homes only after the housing market bounced back,” says Ryan Bailey, head of the Retail Banking Group, Bank of the West. “But Millennials have time on their side. With a long time-horizon to retirement, Millennials can afford to ride out market volatility.”

Bailey tells PLANSPONSOR that plan sponsors and advisers can help educate Millennials about the importance of investing in order to combat inflation, starting with:

• Educating Millennials about why time is on their side: bring in a financial professional to demonstrate the time-value of money and how getting in the market can speed up their timeline to reaching their financial goals. Illustrate through financial models how important the early years of their career are for savers—since that cash, once invested, has the longest timeline to exponentially grow. To allay concerns, explain how portfolio diversification can help Millennial investors manage risk.
• Bringing in a pro for onsite 1:1s: Onsite one-on-one financial consultations are a great way to encourage Millennial workers to evaluate their investing strategy. Bring in a financial professional around open enrollment season so employees can plan out retirement plan and health savings account (HSA) contributions, as well as their investment strategy.
• Incentivizing investing: Often Millennials’ first foray into investing begins with their workplace retirement plan. Offer an employer match stretched to incentivize higher savings levels. Also think about how to beat inertia through automatic enrollment, automatic annual increases, and setting up default investment allocations.

Home ownership and debt

The study also found these equities-shy Millennials have turned to real estate as the cornerstone of their investment portfolio, with homeownership emerging as the most popular ingredient of their American Dream (56%). Following homeownership, half cited paying off debt (51%) and having the financial means to retire comfortably (49%) as the second and third most critical components.

And yet, their desire to own a home is pushing some Millennials to risk their other goals by taking on mortgages and even borrowing against their retirement savings. In fact, one in four say that they are willing to withdraw or borrow against retirement funds to finance down payments for a home.

Sixty-nine percent of Millennials in the study believe you have really only made it when you are debt-free. Many (58%) even say they pay off their credit card balances in full each month. And when it comes to paying for everyday purchases, they are a mixed bag. When paying for items in-person, they avoid credit cards and are most likely to use cash, checks, or debit cards (59%).

Yet, on some level Millennials are comfortable with leveraging themselves for certain express purposes (like homeownership—a purchase that puts most people into debt for decades). Over four in 10 Millennials don’t pay their credit card balances off in full each month. Most of this group says they feel comfortable carrying this revolving debt (59%)—particularly those who are already homeowners (66%). And when making online purchases, they’re more inclined to use credit cards or credit card rewards, such as cash back or points (52%).

“Debt doesn’t have to be a dirty word,” says Bailey. “By responsibly borrowing the amount that is just right for their individual financial situation, Millennials can fund their homeownership dreams, while freeing up capital to invest in the markets today when they still have a long time-horizon on their side.”