- March 5, 2019
Technology is changing how people live their lives in every single way. There are apps for every function including our business transactions. In the last few years, app developers have worked with investment companies to help even the youngest investor learn about the world of stocks and bonds especially when they do not have a lot of money. Millennials are often said to be spenders rather than savers (Baby Boomers generation). This new technology will allow them to put their loose change (something that we saved in a jar) into investment. But these ’spare change’ apps are not for everyone.
Spare Change Challenges
There are currently a number of saving challenges which encourage people to put small deposits towards long term savings. Some of the popular ones include the ‘No Spend Challenge’ and ‘52-Week Saving Challenge’. Another well-known one is placing dimes in plastic bottles, where a full bottle will amount to under $500. The problem with this type of saving is it requires a great degree of discipline and dedication to accomplish the final goal. With technology, investment companies are helping those who find this challenging to save money in innovative and effective ways.
With debt management being one of the major challenges for recent college graduates and first time employees, some companies are using spare change apps to help those who spend money put part of their payment towards stocks, bonds or paying off a credit card. For example, if you purchase a muffin at your favourite café for $3.50, some of the apps would take $1.50 and invest it for you. In a society where many prefer to eat out and use their debit cards often this can be beneficial.
Millennials Don’t Have the Money
Millennials are the poorest of past generations making on average a little over $30,000 per year. The World Economic Forum reported wages have fallen 43 percent for millennials. According to CNBC, many millennials do not believe they have the money to invest while others do not know how to and others blame their student debt. Stereotypes are also preventing these young investors from getting involved in stocks and bonds as many (specifically millennial women) believe the average financial advisor to be a middle aged male. Other views are that this type of investment is difficult to understand and this can be discouraging.
Low Investment
Some investment apps allow millennials to put as little as $5 in fractions to exchanged traded fund shares and transaction fees are minimal. There are other advantages with these spare change apps which include simplicity of use, allowing users to save money towards either short term or long term goals and deposit flexibility (funds can be placed in an account daily, weekly and monthly). Some apps also help users to pay off debt and it is easy to see the progress of your investment. The cons of these types of apps are that your investment can be too low in comparison to the regular transaction fees. Also with spare change apps, the more money you invest, the higher fees there will be ($5000 and up). With traditional investment companies, even though there may be a large upfront deposit, transaction fees can be more cost effective.
Sources
https://www.cnbc.com/2016/04/01/heres-why-millennials-arent-investing.html