E*TRADE Study Reveals the Biggest Financial Mistakes Among Young Investors Post-Graduation

ARLINGTON, Virginia – (BUSINESS WIRE) – E * TRADE Financial Holdings, LLC today announced the results of the latest StreetWise wave, E * TRADE’s quarterly tracking study of seasoned investors. In the middle of the graduation season, the results show how education costs are weighing on young investors:

• Deferring debt repayments outperforms financial mistakes. More than one in four (26%) Generation Z and Millennial investors said their biggest financial mistake after getting their first job was deferring student loan payments, combined with high-interest debt accumulation (26%) and closely following from spending too much (25%). ).

• Education is the biggest barrier to retirement. More than two in three (67%) investors under the age of 34 said that student loans and education costs were the main obstacles to saving in retirement provision, 3 percentage points more than in the previous year.

• And they are withdrawing prematurely to pay for the school. With over 60% of young investors reaching out to pension funds early, 21% said they should pay for education, followed by a medical emergency (25%).

• Her advice to graduates: get started and don’t sleep on benefits. Investors under 34 said building a portfolio (61%) and paying attention to benefits, including student loan repayment plans (60%), were the two top pieces of advice they would give to graduates.

“The cost of education remains high, especially for those who are just starting out,” said Mike Loewengart, managing director of investment strategy at E * TRADE Financial. “Managing debt early on may seem like a monumental task to young graduates, but it can make a meaningful difference in the future. And while it may be tempting to tap into retirement savings early on when you’re spending a lot, it should be your last resort. By getting your financial house in order, you can build strong personal saving habits and ultimately help the next generation of investors feel empowered to take control of their financial future. ”

Mr. Loewengart gave some tips on how graduates can really get started with saving and investing:

• Look at the savings hierarchy. Knowing where to start in managing your finances can be daunting, but following the hierarchy of savings and investments can help create a roadmap. First, consider building an emergency fund – 3 to 6 months of living expenses is a good goal. Next, turn to tackling high-yield debt. Once young investors have a safety net and are managing their debt, start small and start hiding for retirement.

• Call for automatic investments to help. One way to build solid financial habits is to set up automatic deposits into a retirement account. While you cannot control the market or your investment returns, you can control how much you add to your account. By enabling auto investing, you can also reduce the risk in your portfolio through dollar-cost averaging – and potentially take advantage of the inevitable ups and downs in the market

• Take advantage of the advantages in the workplace. Many employers offer retirement plans that are a great place to start investing, especially if they offer a contribution. But more and more employers are also offering holistic financial wellness services, such as student loan repayment programs. Make sure you know everything that is available.

About the survey

This wave of surveys was conducted April 1-12, 2021 among an online US sample of 957 self-directed active investors who manage at least $ 10,000 in an online brokerage account. The survey has an error rate of ± 3.20 percent with a confidence level of 95 percent. It was used and maintained by Dynata. The panel is divided into thirds active (acting more than once a week), swing (acting less than once a week but more than once a month) and passive (acting less than once a month). The panel consists of 60% men and 40% women, with an even distribution across online brokerages, geographic regions and age groups. The data set <34 includes 273 investors between the ages of 18 and 34 years.

About E * TRADE Financial Holdings, LLC and Important Notices

E * TRADE Financial Holdings, LLC and its subsidiaries provide financial services including brokerage and banking products and services for retail clients. Securities products and services are offered by E * TRADE Securities LLC (member SIPC). Commodity futures and options on futures products and services are offered by E * TRADE Futures LLC (member of NFA). Managed account solutions are offered by E * TRADE Capital Management, LLC, a registered investment advisor. Banking products and services are offered by E * TRADE Bank, and RIA custody solutions are offered by E * TRADE Savings Bank, both of which are national federal savings banks (FDIC members). More information is available at www.etrade.com.

1. Automatic investing and dollar-cost averaging do not guarantee a profit and also do not protect against losses in declining markets. Investors should consider their financial ability to continue buying during times of low price levels.

The information contained herein is for general informational purposes only and should not be viewed as investment advice. Past performance does not guarantee future results.

E * TRADE Financial, E * TRADE and the E * TRADE logo are registered trademarks of E * TRADE Financial Holdings, LLC. ETFC-G

© 2021 E * TRADE Financial Holdings, LLC, a Morgan Stanley company. All rights reserved.

Referenced data

What do you think was your biggest financial mistake after your first job after college?
	AGE <34
Deferral of student loans	26%
High credit card debt incurred	26%
Spending too much money on material goods	25%
Do not use the employer’s 401k program	13%
Spending too much on rent	7%
Other	4%

When it comes to your personal ability to save for retirement, what are the following barriers?
	AGE <34
	Q2’20	Q2’21
Training costs or repayment of student loans	64%	67%
Rent or mortgage	67%	63%
Health care costs	62%	63%
Living expenses such as groceries or utilities	60%	60%
Do you want to live for today?	55%	59%
Retail shopping and / or dining in restaurants	58%	58%
When a parent lives with you	49%	57%
childcare	50%	55%
If you have an older child living with you	53%	48%

Have you ever withdrawn money from an IRA or 401 (k) before the age of 59.5, and if so, for what?
	AGE <34
	Q2’21
Yes (net)	61%
Yes, to pay for a medical emergency	25%
Yes, to pay for the training	21%
Yes, just to pass it on for me or my family	17%
Yes, to make a big purchase	17%
Yes, because I became unemployed	fifteen%
Yes, to spend on vacation	9%
Yes, for vacation expenses	3%
Yes others	2%

What advice would you give a new graduate to help manage their finances?
	AGE <34
	Q2’21
Start a portfolio – no matter how small	61%
Pay close attention to your employee benefits package (e.g. repayment of student loans, health care, retirement provision)	60%
Try not to take on additional debt	39%
Assume increased risk, time is on your side	29%
Create an emergency cash fund	25%
Other	–

Gen Z and Millennials (young investors) are defined as ages between 18 and 34 years old.

ETFC

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