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Younger Workers Were Taught to Save -- but Not Invest

By Maurie Backman - May 14, 2018 at 6:18AM

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Saving for the future is unquestionably important. But if you don't invest simultaneously, you're going to lose out.

We all have various goals to save for, whether it's having cash on hand for emergencies, buying a home, or funding a comfortable retirement. And thankfully, most younger workers agree that saving money is important. But while diligently putting money aside each month might help you achieve your immediate financial goals, if that's all you're doing, you're missing a key piece of the puzzle with respect to your long-term goals: investing your money for growth.

In fact, a large number of younger workers aren't investing at present, and a big reason why boils down to the fact that they were never taught to do so. Though 62% of millennials claim their parents encouraged them to save money, only 33% say their parents talked to them about ways to increase wealth other than saving part of a paycheck. That's the latest from PNC Investments, which, not surprisingly, also found that only 33% of younger workers are confident they're saving enough for the future.

Group of young professionals sitting around a table with their computers, with one woman smiling and facing front.


Now let's be clear: If you're already saving money early on in your career, you're off to a good start. But if you don't invest your savings, you're apt to be disappointed when retirement rolls around.

The importance of investing

Why is it so crucial to invest? Namely, because in any given situation, more money is better than less money, and when you invest your cash, you have an opportunity to grow it into an even larger sum. But on a less basic level, investing your retirement nest egg is crucial because if you don't, your savings won't manage to keep up with inflation.

You've probably heard that a dollar today won't be worth as much in the future, and that's because the value of money tends to erode over time. So let's imagine your typical living costs go up by 3% each year, but you keep your savings in the bank and therefore only earn 1% on an annual basis. By the time you're ready to retire, you're going to be at a major disadvantage because that money of yours will have lost buying power. On the other hand, if you invest your savings and earn an average annual 7% return on your money, you'll not only keep up with that 3% inflation rate, but outpace it.

The most efficient way to invest your money

Investing isn't a simple matter of snapping your fingers and saying "OK, let's invest, then." You'll need a solid strategy if you want to grow your savings without taking on needless risk. That said, if you're young, the stock market is actually the best place for the majority of your savings. Even though it's historically been volatile, it's also delivered solid returns over time. In fact, the 7% yearly return referenced above is actually several points below the market's average.

Of course, you don't want to put all of your money into stocks. You should also look to keep a portion of your long-term savings in bonds, and even a bit in cash. But if you want to grow your wealth efficiently, stocks are the way to go.

Check out the following table, which shows what your nest egg might grow to depending on the amount of money you're able to set aside each month and invest in stocks:

Monthly Savings Contribution

Total Accumulated Over 40 Years
(Assumes a 7% Average Annual Return)










$1.19 million


$1.43 million


Let's be optimistic and assume you'll manage to save $600 a month over a 40-year career. By the time you're ready to retire, you'll have put in $288,000 of your own money.

But thanks to the power of stocks and the beauty of compounding, you'll enjoy a gain of over $1 million. On the other hand, if you were to keep that same money in the bank earning 1% interest, you'd end up with just $352,000 after 40 years. And that's far less impressive.

If the idea of stock investing seems intimidating, you can follow this beginner guide to get started. Also keep in mind that the younger you are, the more time you have to ride out the market's ups and downs.

Think about it this way: Though stock investing comes with some risk, if you leave your money in cash, you'll risk running out of it once you're a senior. And that's a far more dangerous notion to grapple with.

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