Updated on Wednesday, February 17, 2021
A lot can change in 30 years (Google, GPS in-car navigation and gender reveal parties werenâ€™t even â€śthingsâ€ť three decades ago), and that includes peopleâ€™s financial habits. Younger Americans are particularly fluid when it comes to their habits, and today theyâ€™re making riskier investments than their counterparts were 30 years ago.
MagnifyMoneyâ€™s researchers analyzed 30 years of data regarding directly held stocks, certificates of deposit (CDs) and savings bonds, finding that families younger than 35 are less likely to invest in safer assets, such as bonds and CDs, and more likely to invest in stocks than those their age in 1989.
Overall, however, median asset balances among all three investment tools have plummeted.
In 1989, savings bonds and CDs were a relatively popular choice for families under 35, with 26.1% owning bonds and 8.8% owning CDs. Fast forward 30 years to 2019 and only 6.3% of families younger than 35 owned bonds and 3.4% owned CDs.
Meanwhile, direct stock ownership has become more popular with the younger set, with 13.8% of families younger than 35 owning them in 2019, versus 10.9% in 1989. Stock ownership in this age group spiked in 2001, with 17.4% of families younger than 35 owning stock that year.
Why the shifts? DepositAccounts founder Ken Tumin said much of it can be attributed to low interest rates and the fact that buying and selling stocks is easier â€” due to online brokerages and other similar options â€” and less expensive than ever today.
Hereâ€™s a deeper look at the three categories.
The U.S. savings bond program began in 1935, offering people a safe way to save money and fund the government. By 1989, they were more popular with families younger than 35 than CDs or stocks, but their popularity plummeted over the next three decades. Between 1989 and 2019, there was a 75.9% percent decrease in bond ownership among this group.
The biggest percentage change decreases came between 1998 and 2001 (17.1% to 12.7%) and 2007 and 2010 (13.7% to 10%).
Itâ€™s not just younger investors who have lost interest in bonds, though: The rate of savings bond ownership has declined significantly for families of all ages in the past 30 years. In 1989, 23.9% of families owned savings bonds, versus just 7.5% in 2019. That represents a 68.6% decrease â€” slightly less than the 75.9% decrease in families younger than 35, but still significant.
Since 1989, there have been two upward shifts in bond ownership among families younger than 35:
Tumin said the 2001-to-2004 spike (12.7% ownership to 15.3%) may be attributed to Series I bonds, which were introduced in 1998 but took a few years to gain traction, as well as the Treasury Departmentâ€™s 1999 introduction of an online storefront that allowed people to buy savings bonds using a credit card.
â€śThis was a good deal, especially for those who used cashback credit cards,â€ť Tumin said. â€śYou could accrue credit card rewards as you built up your savings with I bonds.â€ť
In 2002, the new TreasuryDirect system allowed people to buy paperless Series I savings bonds online. This made it easy to purchase, hold and redeem large amounts of I bonds in a way that was similar in convenience to online banks.
The most recent 2016-to-2019 increase in popularity among families younger 35 was likely due to rising interest rates at the time, Tumin said, but that same spike wasnâ€™t seen among families of all ages, with the rate of savings bond ownership falling from 8.6% to 7.5%.
Additional look: Another factor that likely discouraged savings bond ownership came in 2011, when the Treasury stopped offering paper savings bonds, except for tax refunds. â€śMany young people used to receive paper savings bonds as gifts from family members,â€ť Tumin said. â€śThe lack of paper savings bonds mostly ended savings bond gift-giving.â€ť
CDs have been a less popular choice for families younger than 35 when compared to bonds and stocks, and the rate of ownership declined significantly over the past three decades. Between 1989 and 2019, there was a 61.4% ownership decline, which is nearly the same decline in ownership by families of all ages during that time period.
There were, however, a few periods when the percentage of families younger than 35 owning CDs increased:
Tumin said the most recent increase is likely due to rate hikes.
We started to see significant CD rate increases in 2017 as the Fed was well into a series of rate hikes, Tumin said. The demand for CDs rises as rates rise.
Direct ownership of stocks, on the other hand, has increased among younger Americans in the past three decades. In 1989, 10.9% of families younger than 35 owned stocks. That number rose to 13.8% in 2019, a 26.4% increase.
Between 1989 and 2019, there were some significant increases in stock ownership among young Americans:
In general, direct ownership of stock among families of all ages has actually declined. In 1989, 16.9% of families owned direct stock, while that number dipped to 15.2% in 2019 â€” a 10.1% decline. That number hit a high of 21.3% in 2001, then plummeted until 2013, when it started to climb back up again.
Tumin attributes the rise and fall of stock popularity to a couple of factors. He said 2001 was at the end of the dot-com bubble, a time when many people were attracted to stocks.
Then, more recently, between 2016 and 2019, it was generally a bull market for stocks, which encourages stock ownership, and the rise of new digital brokerages with low and zero trading fees became popular, which likely contributed to more people buying stocks.
While stocks have been the chosen one when it comes to investments among younger families, that doesnâ€™t mean that those who are buying it are buying larger amounts of stock than their counterparts did 30 years ago. In fact, the median stock balance for families younger than 35 decreased 56.7% between 1989 and 2019. Hereâ€™s a closer look at the specifics:
Starting to invest at an early age is one of the best ways to build long-term wealth, and today there are more tools than ever to help young investors get the greatest payoffs down the line.
Here are five things young investors should consider:
MagnifyMoney researchers analyzed the Federal Reserveâ€™s 2019 Survey of Consumer Finances â€” the latest available â€” to determine the percentage of families younger than 35 who hold CDs, stocks and savings bonds, as well as the median value of these assets.
Stocks within this study represent direct ownership of publicly traded stock. Indirect stock holdings, which can contain stock held in retirement accounts, were excluded.