The necessary initiation of young people to savings

As a result of health restrictions, the level of savings of the French has jumped in recent months and in particular that of young people aged 18-24. Between lower returns on risk-free investments and the return of inflation, what savings solutions are available to young people?

Rather ant or a grasshopper ? According to a survey with OpinionWay, young people would be rather ant in managing to set aside 281 euros per month, or 5 euros more than the national average! The Covid-19 crisis had the effect of a click in the young generation. Between the impossibility of consuming with the closure of cinemas and bars and fears (justified) about the future, the level of savings of young French people has never been so high. This awareness of the need to build a woolen stocking is all the more necessary as the level of unemployment among those under 25 is approaching the 20% mark. [1] , nearly 3 points above the European Union average, to this are added doubts about the sustainability of the pension system.

Traditional investments in decline

The savings efforts of young people face a bitter reality with low-paid risk-free investments like the popular Livret A which caps at 0.5% and the return of galloping inflation estimated at 1.5% for 2021. In this context, small savers can only observe the nibbling of their savings. Same observation on the life insurance side, euro funds served an average remuneration of 1.08% in 2020 [2] and that of 2021 does not promise to be more glorious.

Savings investments no longer make it possible to build up long-term wealth, but it remains interesting to place precautionary savings that remain available at all times and in which to draw to finance a trip or even a move. If young people are saving so much at the moment, it is first and foremost out of fear for the future and the need to prepare for it. Therefore, the question to ask is where should they invest and how?

Invest in the stock market now

What if the solution was the stock market? By investing in the financial markets from your twenties with a long-term investment horizon of 10, 15, 30 or even 40 years, the stock market offers the prospect of greater capital gains than real estate. Since the onset of the health crisis, the stock market has regained a renewed interest in young adults under 35. The Autorité des Marchés Financiers (AMF) has registered more than one million new scholarship holders since 2019 and the share of direct equity holders under 35 increased from 11% to 18% between March 2019 and March 2021.

The trend should not fade in the coming months with a CAC 40 reaching record highs, up 17% since the start of the year. The prospect of easy money is attracting young savers who benefit from increasingly simplified access to financial markets through various investment platforms accessible on smartphones.

The temptation to pull off a “good shot” is all the greater since the new stock marketers observed during the first containment the fall of the financial markets before a spectacular rebound in the following months.. Same thing on the side of crypto currencies where we talk about crypto-mania, the fever takes investors on these highly speculative investments with the risk of a painful backlash.

Educating young people about financial markets, a necessity

Investing in the financial markets is not without risk and the “casino” effect can take away the savings of small holders. To take full advantage of the stock market’s potential, it is imperative to have a long-term investment horizon to smooth out the vagaries of the financial markets. A principle adapted to the youngest who have their lives ahead of them and can immobilize part of their savings over several decades.

The adage “don’t put all your eggs in one basket” is to be taken literally. The key to a successful investment in the stock market necessarily passes through diversification at the sectoral level (consumer goods, raw materials, health, technology, financial services, etc.) and geographically (Europe, America, Asia). For beginners, it may be wise to invest in ETFs that replicate a stock market index identically or in UCITS, and if possible labeled SRI to give meaning to your savings.

Finally, it is not necessary to invest large sums. To acquire good savings habits, it is preferable to invest small amounts on a regular basis to build up assets over time and to calmly face the future.

[1] Source Eurostat March 2021

[2] Source Good Value For Money