Friends and family are essential to sparking young people’s interest in investing, according to new research from the Association of Investment Companies.
Family is the main trigger: 39 percent of 20-40 year olds say talking to a family member led them to invest.
Conversations with friends and colleagues are also important. About 23 percent of younger investors said they started investing after talking about it with a friend or colleague.
A recent Fidelity Investments study also found that millennials who discussed finances with their family or friends were more likely to start saving for retirement or investing.
But the cost-of-living crisis is a major barrier to young people wanting to invest, affecting three-quarters of potential young investors.
We look at what young people invest in, how and where they do it, and provide expert tips for new investors.
Support: Conversations with family and friends are important triggers for young investors
How young people invest
The majority of young people use an online platform to invest, while 17 percent use a bank or building society and 13 percent use a financial advisor.
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Despite the low costs, only 11 percent use an online investment service such as Nutmeg or Wealthify.
Stocks and shares are the most popular investments among young people, held by two-thirds.
This is followed by the riskier cryptocurrency, which is owned by half of young investors. More young male investors owned cryptocurrency (59 percent) than young female investors (43 percent)
Moneybox research conducted late last year found that 36 percent of 18 to 26 year olds who invest in cryptocurrency have invested. This is significantly more than any other age group and more than the national average of 15 percent.
Female Invest, a financial education and community platform, has said younger women are more likely to invest in sustainable or socially responsible companies than their male counterparts, and tend to opt for funds or ETFs, often with a passive attitude.
Stocks and shares Isas are the most commonly used vehicles for young people to invest, followed by company pensions and then cash Isas.
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What do young people think about investing?
Research shows that younger investors are generally engaged in their investments.
More than half of the young investors who took part in the AIC’s survey said they had checked their investments in the past week, and 29 percent had checked their investments in the past month.
These young investors reported feeling positive about investing and also being interested, excited, powerful, confident and calm.
In contrast, 42 percent of young investors felt cautious and 14 percent were concerned about investing.
Young women are more cautious investors
Annabel Brodie-Smith, the AIC’s director of communications, points out that “women are particularly cautious, with a fifth of female respondents concerned about their lack of investment understanding compared to 9 percent of men.”
And 30 percent of men also said they were calm about investing, compared to just 13 percent of women.
Financial education website Female Invest explains that women are more likely than men to seek advice from their social networks when making investment decisions, but they also have less confidence in their investment abilities.
“This often leads them to seek community before placing their first trade, to gain both knowledge and trust,” says Anna Sophie Hartvigsen, co-founder of Female Invest.
Women also often invest in a fund rather than a stock to diversify from the start.
Sources of investment information
Young investors depend most on people for their investment information, whether they be friends, a financial advisor or family members.
Social media is the second most popular source of investment information for young people, with the most used channels being YouTube, Instagram, Reddit, Twitter and Facebook.
But young investors still use traditional media to get information about investing: 22 percent of young people read the financial sections of newspapers and 20 percent use books for their information.
Brian Byrnes also emphasizes the importance of reliable sources of information and breaking down the traditional barriers to investing.
He said, “Features like change collection and no-account minimum amount help people take that crucial first step on their investment journey.”
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