Millennials prefer cash investment over stock market, new survey finds

Ben Tobin | USA TODAY

Show Caption Hide Caption Millennial men and women handle money differently Millennial women are staying away from risky investments like cryptocurrentcy. Here's why.

Millennials are the most responsible generation when it comes to emergency savings, surveys indicate. But when it comes to long-term investing, this age group appears to be a little too cautious.

When asked what the best long-term investment is, 30 percent of millennial (18- to 37-years-old) respondents said cash, according to a new report from consumer financial services site Bankrate.com.

For those 38 and older, the figure drops to 21 percent who believe cash investments such as savings accounts and certificates of deposit are the best place to park their money. Instead, 37 percent of these older respondents cite the stock market as their top investing choice.

Millennials’ skittishness with investing in the stock market may be linked to the Great Recession, according to Kevin Ta, a senior wealth strategist at PNC Wealth Management. The millennial generation “may not have had personal experience investing in the market and only witnessed the catastrophe that ensued with the global financial crisis,” Ta said.

This may be the reason young people are avoiding parenthood According to the National Center for Health Statistics, fertility rates are down and a New York Times poll may shed light on why.

Because older generations have had more exposure to fluctuations in the market, their experience makes them less prone to avoid it, Bankrate.com’s chief financial analyst Greg McBride said. “They’ve seen this movie before,” he said. “Markets go up and markets go down, but they go up a lot more than they go down.”

More: Risky behavior: 1 in 3 millennials dipped into 401(k) or IRA to finance home purchase

More: Medical costs in retirement are projected to be average of $200K. Are you prepared?

More: How to tell if your 401(k) plan is any good

These attitudes have led to a disparity in how much generations are earning on their investments. According to the Bankrate report, millennials are least likely of any generation to earn more than 1.5 percent on their savings. They’re most likely to be earning 0 percent interest or do not know what rate they’re earning. Baby boomers are the most likely to earn more than 1.5 percent.

Millennials are struggling with credit card debt Millennials feel they’re being held back...by their credit score that is. Buzz60's Sam Berman has the full story.

With stock markets yielding a higher rate, on average, Ta said there is a big opportunity cost for millennials to not invest long-term.

With higher health care premiums and a likelihood of living longer, millennials are “going to have the highest retirement savings burden in history,” McBride said. “You simply cannot save enough to get the nest egg you need in retirement without compounding higher rates in return.”

Among all U.S. adults, just 18 percent are earning more than 1.5 percent on their savings at a time when the top-yielding, nationally available savings and money market accounts are yielding 2 percent or more.

The top reasons Americans cite for not opening an account with an online bank paying a higher rate are (respondents could select more than one reason, unless they didn’t know such accounts existed):

36 percent: Comfort level with current financial institution.

Comfort level with current financial institution. 31 percent: Prefer access to a local branch.

Prefer access to a local branch. 23 percent: Don’t have enough savings to make it worthwhile.

Don’t have enough savings to make it worthwhile. 22 percent: Worried about the security of their money.

Worried about the security of their money. 19 percent: Didn’t know such accounts existed.

Follow USA TODAY intern Ben Tobin on Twitter: @TobinBen