- December 17, 2023
- Posted by: legaleseblogger
- Category: Related News
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Middle Class Family Attitudes Towards Investing:
Coming from a Middle Class Family and the Influence on Investment Choices
Growing up in a middle class family, my parents always played it safe with money, and they only invested in high-yield savings accounts (HYSA). This conservative approach to finance rubbed off on me, and I developed a deep-seated belief that investing in stocks was risky and potentially addictive. The complexity of stock analysis only reinforced my aversion to the market.
It wasnÔÇÖt until I had been working for over 12 years and got married that I started to seriously consider investing in stocks. I have now been investing for the past 4 years, but I can’t help but feel like I missed out on valuable time in the market. I wonder if this is a common sentiment among middle class families. What were the factors that deterred others from entering the market, and what ultimately inspired them to change their mindset?
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What keeps me away from the market outside of my 401k / IRA is the better question. I hope everyone reading this sub is investing using their 401k or other retirement vehicle.
Outside of retirement, I just donÔÇÖt have the money. Mortgage, retirement, daycare and 529s for my kids sap any leftover funds I would otherwise invest.
DonÔÇÖt have money? I had kids young, bought a house, then I went back to school, and then I got a good job, and so now I can finally start to invest.
Sure the market is risky, but if you invest in low cost ETFs your money is pretty safe. HYSA is fine if you can afford to throw enough in them, or for your emergency fund. But over 30-40 year horizon the stock market is pretty safe.
ItÔÇÖs riskier to not invest at all. Your money needs to grow or youÔÇÖll be working forever. A HYSA is not going to get you where you need to go. I would suggest reading more about how the market actually works until youÔÇÖre comfortable with it. ItÔÇÖs not some magic box, itÔÇÖs simple enough to understand.
Invest in mutual funds and index funds.
Had to weigh risk tolerance with average yield of HYSA vs S&P500 and time until you need to access the money. If not needed for at least 5 years then makes sense to be a little more risk tolerant. If needed within a year or two, then makes sense to keep money liquid in HYSA.
Nothing should. Read the Simple Path to Wealth by JL Collins. Completely anecdotal example, but my grandparents were an LPN and mailman and died with about 2 million due to dollar cost averaging consistently from roughly 1965-2005 or so, then living frugally and letting their investments grow over the following 15 years.
I had an employee that I tried to convince to invest in the market. I’ve been investing since around 2007. So I tried to give him wisdom about investing through various markets with index funds.
He was SO worried about loss that he didn’t even want to risk $100. So I found a brokerage that at the time would give you $100 if you opened an account with $100. He still wouldn’t do it out of fear.
This same guy would spend $100 on lotto tickets and cigarettes.
Everything has risks but your route pretty much guarantees that your money loses it’s value over time. It’s like if you had me hold 100k of your money for you and I return 70k of it back in 10 years
We have 401ks and Roth IRAs, but I donÔÇÖt know much beyond those, so I donÔÇÖt know where to start.
I have a similar thing with my parents, they went hog wild during the dot com bubble and lost alot ($30k, that was alot of money for immigrant parents that worked blue collar jobs that couldn’t save much), since then they won’t touch it and deem it risky, so they told me not to do as well. Well I didn’t listen, I did my research and due dillegance and went all in and have reaped the rewards of it. Family now comes to me for investing advice. It’s way riskier not to be in the market if you want to get ahead passively.
It’s never too late to be in the market. Parents invest only based on what I tell them and they just started getting back into the market in their 70’s.
Do your research, don’t follow hot tips from friends and co-workers. Worst case put it in an index fund and let ride till whenever you need it, you will still earn more than you had today eventually so its never too late.
I’ve never bought an individual stock in my life not sure if that is what you mean. Index funds are all I’ve ever needed and very happy with that decision.
I’ve seen so many coworkers who I have great respect for turn absolutely squeamish at the thought of investing and/or managing their own retirement. These are smart people who work hard, come from middle class backgrounds, have degrees, and even work in finance in some cases. I just never truly understood the mentality of working 60+hrs/wk for a company and not taking any time to at least attempt to study the markets. I also have friends whose parents are convinced that the stock market is “the world’s biggest casino,” and that clearly had an impact on their outlook on investing to OP’s point.
Not knowing about total market index/mutual funds kept me, not away, but less invested than I should have been. My parents in their early 60s talking about how they’re still a decade from retiring set me straight. I think they have an annuity and IRAs started less than 10 years ago. Efforts to talk to them about it haven’t been successful.
IÔÇÖm in my mid-40ÔÇÖs. Started investing at my first job that offered a 401k when I was 32. Prior to that I was kinda scared of the stock market. I heard horror stories about people losing money and I hate losing money so I stayed away from it and missed out on things like the dot com bubble and couldÔÇÖve made a lot of money (I also could of lost some too I guess).
But like I said I finally started investing 15 or so years ago and now have some modest retirement savings. I kinda wish I was still scared of the stock market tho because now I obsess on it, checking ny retirement account balances every five minutes and constantly toying with investing ideas, it gets pretty tiresome.
I read an article once that asked an old stock market guy to dispense some wisdom he gained over the years and one his quotes was, ÔÇ£Some people go their entire life without owning a single share of stock and live completely happy lives.ÔÇØ I think thereÔÇÖs some genuine truth in that statement, as money isnÔÇÖt everything.
A lifetime of foundational poverty which has nurtured a deep distrust of institutional finance, which has been validated time and time again, especially with 2008 and 2020.
Well the stock market has made me a millionaire in very short time. I also just lost 260k at once on a garbage risky company. If you stick to indexes S&P 500 or blue Chips there’s no worries. I’m stupid don’t be like me but do invest in the stock market just do it the right way.
I think this mentality was more common with the older generations. My boomer dad saved nothing for retirement and told me how his parents pulled all their money out of the stock market because it ÔÇ£kept going up and down.ÔÇØ This is an older, working class generation without access to the internet and knowledge of finance. Pensions rather than 401ks also used to be more common in that generation, too.
Kid of working class immigrants. I saw that the market made no sense in the lead up to the 2008 crash – my parentsÔÇÖ house value skyrocketed far faster than anyoneÔÇÖs incomes were rising, and a sibling who had just declared bankruptcy from frivolous debt was being offered mortgages. I was ~25yo with no higher ed, and even I could see that the basics were a clusterf*. Young colleagues were openly boggling at the absurdly high home loans banks were offering them. A few years later, boom, the 2008 crash. Several older colleagues on the verge of retiring got wiped out and got stuck working for another decade. IÔÇÖve also looked more closely at 401k plans, and other than the employer match, even with longterm investment, the low end of the estimated projected growth is alarmingly close to zero. Investing makes sense statistically, but there are far more losers than anyone seems to want to acknowledge.
Edit: grammar
Being uneducated
Being who are uneducated about money think ÔÇ£investingÔÇØ is what people do when they amass a pile of money then start picking stocks.
For most average people looking to save for retirement , you should already be ÔÇ£investedÔÇØ in the market via broad mutual funds / index funds within tax-advantaged retirement accounts . A target-date fund is a super dummy-proof way to do it.
Fortunately, when I first graduated college, I asked my uncle (a financial advisor) if he had any suggestions. He said, “start a Roth IRA before congress realizes what they’ve done and take it away.” From there, I read a book or two on portfolios, went with a simple low-cost index approach (i.e. “VT and chill”), and have been doing it ever since. I initially started with just 401k and IRA, and later added a regular brokerage account.
These days, for anyone getting started, I would highly recommend “The Simple Path to Wealth” as a comprehensive primer on growing money. Regrettably, the title sounds like a get-rich-quick book, but it’s not. The book lays out the long game in terms of saving money, spending carefully, and investing wisely for the long haul. It also explains the nuts and bolts of how different retirement accounts work, ETF’s vs mutual funds, etc.
Raised the same way you were. Middle class parents that only did savings (outside of a 401K and a pension my Dad has). Biggest thing I learned was to NOT GET INTO DEBT (this doesn’t apply to a mortgage or if you NEED a car). After that was putting money into my 401K for the match and MAX out the ROTH IRA. There are a lot of other little things you can do however those are the basic steps.
Time does matter however “timing” also matters. Someone who started investing in 2008 (when the market tanked) would probably be up 3 to 4 times now. Long Term best thing you can do is dollar cost average into basic funds. If you can save a bunch investing into a good local business can help as well
2008.. lost 75% of my retirement savings
I use an index fund and my 401k. ItÔÇÖs day trading I stay away from. ThatÔÇÖs little more than gambling.
I come from a lower class family, and my parents are silent Gen, so there wasnÔÇÖt money to invest, and IÔÇÖm not sure either one would have known what to do if there had been. IÔÇÖm in blended stuff, and I mess with my company stock because I know the cycle, but IÔÇÖm mostly good riding the S&P.
…B.S.- HYSAs keeping up with inflation haven’t existed since the 1980s… (the term “high-yield” came about because savings accounts 1990-2022 paid <1% annual interest)…