Not in a place to invest yet? Don’t worry, you are not alone.

Recently, Ana Teresa Solá of CNBC and I discussed some statistics that came from a poll done by CNBC and Generation Lab. If you want to check that CNBC article out, here is a link!

Ana explained the poll to me and there were some seemingly dismal data points. She shared that 61% of people ages 18-34 are not currently saving for retirement. On top of this, 48% of those polled do not have more than 2 months’ worth of expenses saved up. The second data point is, in my opinion, key to understanding the first data point.  

These numbers may surprise you, but what if we present them differently? The optimist in me wants to focus on the fact that 39% of Gen Z and millennials ARE currently saving for retirement and that over half of Gen Z and millennials have a few months’ worth of expenses saved as cash.

In any case, let’s discuss why these numbers make sense and why they do not necessarily frighten me. The financial planner in me wants to believe that of course, young professionals are not saving for retirement if they do not have a cash reserve (AKA emergency fund) in place. This is an absolute cornerstone of financial planning. Ensuring that you have some multiple of your expenses saved is a must. A general rule of thumb is 3-9 months’ worth of expenses. So, it is very possible that while young professionals are not saving for retirement, they are focusing on their cash reserves, which is exactly what a financial planner would recommend they do!

Now on to the retirement savings. I am pleasantly surprised to know that 39% of the poll is currently saving for retirement on a monthly basis. That is huge! Many young professionals are nowhere near their peak earning years. A good amount of people between the ages of 18 and 34 are not even professionals yet as they are completing their undergraduate studies or pursuing advanced degrees! The fact that 61% of people between the ages of 18 and 34 are not saving for retirement on a monthly basis is not as scary as it may seem. 

I’ll let the optimist in me take over here. I truly believe that Gen Z has a firm financial foundation. We leverage technology to our advantage and in my experience, I have seen that Gen Z knows which questions to ask. Even if they do not know a topic in depth, they are asking the right questions. 

As time goes on, I am confident that our generation will increase their savings, especially as their income increases. Focusing on investing in yourself, whether it be graduate school, designations, or building your own business, is one of the greatest ways to increase income, thus increasing your ability to save and invest more traditionally.

After taking time to digest those statistics, I believe that our generation is focusing on building their human capital. This investment far outsizes the ability to invest in traditional markets. As Warren Buffett said, “The best investment you can make is an investment in yourself… The more you learn, the more you’ll earn.”

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Have a more specific question or want to get your finances in order? Feel free to reach out to [email protected] for a free consultation!