Online savings accounts offer some of the highest-yielding interest rates for consumers, but if you’re part of the millennial generation, chances are that you’re not taking advantage of them. Survey after survey tells us that millennials are risk averse to investing. It’s no wonder why. Many millennials grew up in the midst of the worst economic downturn since the Great Depression and are already weighed down by huge debt right after graduating from college.
UBS Investor Watch report found that millennials are the most fiscally conservative generation since the Great Depression. About a third of the 4,165 investors surveyed describe their risk tolerance as conservative or somewhat conservative while millennials’ average asset allocation is extremely conservative. A peek inside the average millennial portfolio shows 52 percent is dedicated to cash compared to 23 percent for other investors.
“Millennials seem to be permanently-scarred by the 2008 financial crisis,” said Emily Pachuta, head of investor insights at UBS Wealth Management Americas. “They have a Depression-era mindset largely because they experienced market volatility and job security issues very early in their careers, or watched their parents experience them, and it has had a significant impact on their attitudes and behaviors.”
One of those millennials is 31-year-old Marie Alcid, a university curriculum planner from Oakland, Calif. Alcid said she believes the recession has driven millennials to want to save more money than previous generations.
“I guess you could say [we’re] afraid,” said Alcid, whose father was laid off during the recession. “Plus, I would assume most millennials have very minimal knowledge of investing.”
Alcid says she is focused on saving for retirement and paying down her student loans for now. While saving for retirement and getting rid of student debt are both worthwhile goals, it doesn’t have to come at the expense of maximizing your savings. That’s something opening an online savings account would do.
“I already have a saving accounts with my bank,” said Alcid. “I haven’t thought about opening one online. I just did what was most convenient.”
That complacency is a feeling shared by many other people in her generation. Saving isn’t a bad thing in and of itself, but when it comes to maximizing those savings, many millennials are in the dark. Forget investing in the stock market (for now), if you haven’t already moved the money you’re saving into a high-yield online savings account, you’re behind. Why, pray tell, have you decided not to park your money in an online savings account? Because you don’t like to save money — or because one of these reasons?
Millenials want to save cash
Don’t we all. Millennials are the most risk averse group. It’s one thing to not want to save if you’re broke or saddled with high student debt. It’s another to just hold on to cash out of fear. Expert after expert has stated the importance of saving for retirement, so we won’t even address that issue. All young people should be focused on saving — even with student loan bills piling up. And one of the easiest ways you can save is by parking your money in an online savings account.
Surveys show that online banks offer the highest interest on savings. Why would you save your money in a brick-and-mortar bank’s savings account at a lower interest rate rather than maximizing your savings with an online savings account? You understand that the money you leave in your savings account will yield you money, don’t you? So park your money in the account that will yield you more. An average interest rate for a savings account might be around 0.32 percent, but an online bank might offer interest rates way above of one percent. In fact, online banks are known for having higher interest rates on certificates of deposit and savings accounts
You can compare savings rates below: