A focus on saving cash is a great plan to build a down payment for a home, but for a retirement savings, it may not be the best tactic. Yet, that is what many young Americans are choosing.
Thirty-nine percent of young American adults, age 18 to 29, say cash is their top choice for investing money they won’t need for at least a decade, according to a Bankrate.com report. The cash preference was three times the number that said they prefer the stock market despite many cashinvestment yields remaining below 1 percent, whereas the S&P 500 has gained 17 percent over the past year.
“The preference for cash and aversion to the stock market among young adults is very troubling considering this age group has the biggest retirement burden,” said Greg McBride, Bankrate.com’s chief financial analyst, in a statement. “They won’t get there without being willing to assume a little short-term price risk in their long-term money.”
Further, young adults may be waiting to add real estate to their portfolios.
Though the typical first-time homebuyer is 31, according to the National Association of Realtor, nearly a quarter of the experts in Zillow’s most recent Home Price Expectations Survey, nearly a quarter of experts expect the median age of first-time buyers would rise to 34 or older in the next decade.
Overall, a quarter of Americans prefer cash investments for money they won’t need for at least 10 years, followed by real estate (23 percent), stocks (19 percent), gold and precious metals (14 percent) and bonds (5 percent), according to the Bankrate report.
“The stock market records are getting the attention of some investors, as the percentage favoring the stock market increased to 19 percent from 14 last year. But overall, Americans are still risk-averse when it comes to how they invest their money,” McBride added.
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