Forget that myth that millennials are bad with money. If recent surveys are accurate, 20- and 30-somethings are excellent at saving money and building up stacked savings accounts.

In fact, nearly 1 in 4 millennials report having $100,000 to more in savings, according to a new Bank of America report. Of those surveyed, “Seventy-three percent are not optimistic about their financial future”, while the same percentage (73%) of millennials surveyed are saving for their future (Bank of America, 2020).

That is encouraging if you are in your 20s and 30s today because you will need your savings if you want to be financially successful and achieve your goals.

However, you need something else that a lot of millennials are skipping out on: investments.

The Big Risk You Take by Saving Money (and Not Investing)

If you’re like most people in this demographic, you remember the Great Recession as something that did a lot of damage to your family’s financial situations.

Maybe family members got laid off or lost their homes. Maybe you saw your parents’ dreams of retirement sail out the window as the market trashed their 401(k)s and nest eggs.

You might have even struggled yourself if you graduated college and found that no one would hire you because they weren’t hiring anyone. Even if you could find a job, it was probably low-paying — and that low starting salary could have set you back financially, even years into your career. Now with unemployment setbacks during the COVID-19 pandemic, millennials are more at risk for prolonged financial insecurity.

In the wake of the recession, people blamed banks and we saw the Occupy Wall Street movement take over the streets of New York for a time. All of this could have understandably left you feeling like the stock market, in general, couldn’t be trusted–it was safer just to save. Now with the novel coronavirus pandemic, investing is something to consider as the American unemployment rate hit record highs in April 2020.

Now investing comes with risks, but learning to invest strategically will allow you to grow wealth and manage those risks.

What if you are a diehard saver but shying away from investing? Well, saving comes with risks, too.

Yes, even if you put your money into a regular bank account, you are taking on risk of inflation. Over time, that risk becomes greater than if you had just put that same amount of money into a conservative investment portfolio in the market.

The average long-term rate of inflation is 3.22%. That means that steadily over time, the money in your bank account loses value. In a few decades, your cash will be worth less than it was when you started saving.

The historical rate of return for the S&P 500 over the last 90 years, on the other hand, is 9.8%. While your cash is likely to be worth 3% less in 30 years than it is today, your investments would likely be worth significantly more.

Here’s What to Do to Build Enough Wealth to Enjoy Financial Freedom

Not convinced enough to start investing? Consider this:

All investments come with risk, but some are less risky than others. If you can’t stomach the thought of potentially losing some of your nest egg, there’s a conservative portfolio for you! In other words, investing doesn’t have to mean throwing all your money into Bitcoin. It is not all or nothing.
Asset allocation and diversification help you manage risk, so you can earn returns without losing everything. Nothing is guaranteed anytime you invest (and really, what in life is 100% guaranteed?). But there are a lot of strategies you can use to help earn the return you need to meet your goals — without putting too much of your money at risk. Asset allocation and diversification are two such strategies you should use to your advantage.
You have to invest in order to grow significant wealth. Unless you’re independently wealthy, most people need to invest in order to accumulate enough assets to reach big goals like financial freedom. That is thanks to compound interest or compounding returns.

Compounding returns are what make investing pretty magical. Compounding happens when you put cash into an investment and it earns a return. You keep that return in the market, and then it can earn a return, too.

That creates an exponential effect that snowballs over time. (You can check out some examples of the power of compounding here if you don’t know how it works.)

You May Want to Invest If You Want Financial Success

The bottom line is that it is wise to invest at least some of your savings. You don’t have to invest everything and in fact, you should keep a small cash cushion that you can access in the event of an emergency, or if you have an unexpected expense you need to deal with immediately.

But otherwise? Put your money to work for you (so you don’t have to work so hard yourself).

Investing is not gambling if you have the right strategy in place and know how much risk is appropriate for you and the goals you want to reach. It can sound complicated (and maybe even a little scary), but you should not do this alone.

That’s especially true if you are avoiding investing simply because you do not know how. It’s okay if you’re not an expert. Hire a financial advisor, who can not only show you how to invest strategically but also focus on your entire financial life to help you meet your goals.

A good financial planner can provide you with comprehensive advice that considers your savings and your investments, and how you can leverage both to enjoy financial success as quickly as possible.

*Diversification/Asset Allocation does not ensure a profit or guarantee against loss.

The information presented is not intended as financial advice, and you are encouraged to seek such advice from your financial advisor.