Millennials are slowly taking over the workforce, but they’re not using their incomes to invest.
According to a study from the Ontario Securities Commission (OSC), millennials who do not currently have investments cited low knowledge and fear of losing money as the top two reasons why they are not keen to invest.
The study found that four in five millennials have their own savings while two-thirds have under $15,000 in non-mortgage debt. Around half of millennials, however, do not have investments.
“Nudging people to create new habits is no small task. Research indicates that millennials are doing a lot right—from saving regularly to paying off debt—but that there are significant barriers that make it harder for millennials to decide whether investing is right for them and to act on their intentions,” the report said.
With this, the regulator created six design principles to help industry players engage and encourage millennials to invest.
The first principle is helping millennials find their own unique motivation for investing. The regulator said stakeholders should have plans in place to assist these young minds in identifying their own motivation.
Another principle is providing personalized, achievable steps that make it easier to get started, given that many millennials cite lack of understanding as a barrier.
The next principle urges stakeholders to draw attention to longer-term considerations by connecting the impact of current decisions to their future consequences.
There is also a need for stakeholders to curate aspirational social comparisons to promote achievable investing habits.
OSC said: “Social comparisons need to be chosen carefully: they can be motivating if they feel achievable and relevant to an individual’s circumstances but can be discouraging if they seem out of reach.”
The OSC also said that it’s vital to inspire trust by putting the needs of millennials first.
“Millennials are focused on getting advice from people who have their needs top of mind,” the regulator said.
The OSC said that the aim of design principles is to start a conversation about how programs, products and services might be delivered in more human-centred ways that will better engage millennials in investing for their future.
“They are intended to inspire stakeholders in all parts of the investing ecosystem — from investment firms, to organizations delivering investor education, to fintech start-ups and others — to test new models, observe how their users respond and continue to learn and adapt,” the regulator said.
It added: “While we believe the design principles that have emerged from this project offer a starting point that is particularly relevant to engaging millennials in investing, this approach has implications far beyond the millennial cohort. Saving rates of Ontarians have been declining steadily for a generation and the behavioural foundation of our design principles should be equally relevant to promoting investing among other cohorts.”
To read the study, click here.