Julie Jason: More women are investing, and at a younger age

More women are investing than ever before, according to Fidelity’s 2022 Market Moves. And they are starting to invest at a younger age — nearly a decade earlier (tinyurl.com/ymxyazky).

As a proponent of financial literacy education, those are pleasing developments for me. After all, the single most impactful element of achieving retirement security is the math of long-term compounding.

Fidelity’s nationwide online survey of 2,015 adults, all of whom were at least 18 years old and had an investment account other than a checking or savings account, found that women in the 18-to-35 age bracket, on average, began investing in a brokerage account at age 21. That age stands out when compared with women who were 36 years and older in the survey, as they started investing on average at age 30.

The younger set starts investing small amounts of money (35% of that group said that’s how they began) in order to get comfortable with investing. That makes sense, considering we are in an era when lower-cost options like stock fractions are available for purchase.

I also like to see women invest for retirement — the younger the better, again for compounding purposes. The 18-to-35 women surveyed opened a dedicated retirement account at the average age of 20, while those now 36 or older did not open a retirement account until age 27 — which, unfortunately, means they shortened their horizons by seven years compared to their younger peers.

Saving early is the answer. Generation Z (those born between 1997 and 2012) has figured that out, according to Fidelity Investment’s 2021 year-end analysis of more than 35 million 401(k), 403(b) and IRA accounts (tinyurl.com/kzxwvrhm). While the total number of Fidelity IRA accounts reached a record of 12.3 million, the biggest growth came from Generation Z men and women, with the number of accounts growing 146% over the previous year, to nearly 275,000.

How much of an investment difference is there when the starting age is delayed? Fidelity provided an example, comparing someone who starts investing at age 25 with someone who begins at age 40. Each person contributes $50 per month until age 67, makes no withdrawals and has a 7% annual rate of return, compounded monthly. Taxes and fees are not factored into the results.

At age 67, the person who started at 25 put in $25,000 and had an ending balance of $144,000. As for the person who started at 40, the investment was $16,000, and the ending balance was $46,000. A difference of roughly $100,000 is something to think about.

Anyone who is aware of the math behind retirement investing would regret not saving and investing as early as possible.

One finding from the survey that I appreciated as a financial literacy advocate is this: 70% of women who were 36 and older said it is important to “educate the next generation about investing.”

If you are part of this majority, are you willing to help do the educating? And if so, how?

Here is some perspective: A recent Cerulli Associates study reported that younger affluent investors (under age 45) are hesitant to dive in without human help. Left to themselves, only a few (20%) said they would open online accounts on their own (tinyurl.com/2p937mau).

If you feel you would like to help educate younger people in your sphere, let me recommend that you encourage them to:

  Start their 401(k) participation as soon as they are eligible.

  Maximize their company matches.

  Learn about how the math of compounding works and how to take advantage to build assets over the long-term.

If you want to get involved with my own financial literacy efforts, which I do on a pro bono basis, let me know. See if you would like to help with a 401(k) “Train the Champion” program that is tied to the 401(k) Champion competition (see 401kchampion.com). I’m also organizing a MarketMath & You training program that teaches how to think about compounding. Email me at readers@juliejason.com; in the subject line, put “education.”

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford) and author, welcomes your questions/comments (readers@juliejason.com). Her awards include the 2021 Clarion Award, symbolizing excellence in clear, concise communications. Her latest book, a curated collection of Julie’s columns, is “Retire Securely: Insights on Money Management From an Award-Winning Financial Columnist.” To hear Julie speak, visit juliejason.com/events.