Whether you’re decades into your investing journey or just starting out, time can be a double-edged sword.
Investing is a long-term game and while many fear the ups and downs of the market could ravage their returns, that’s only true if you’re trying to ‘time the market’.
Most people who invest and stay invested for the long term end up significantly better off.
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Much of that is due to the power of compounding, which is more powerful the more time you have for it to take effect. Yet for younger investors – those at the start of their journey – the effects of inflation will have a huge impact on how they approach financial matters.
Younger generations aren’t apathetic when it comes to investing. A recent Vanguard study reveals that 68% of savers without investments say they plan to start investing in the next two years, rising to over 90% among Generation Z (Gen Z) and more than 80% among Millennials.
What motivates Gen Z investors?
Vanguard found that Gen Z accounted for nearly 780,000 new investors in the past two years, contributing £25 billion. These younger investors have a larger appetite for new, esoteric investments like cryptocurrency (crypto) compared with older demographics.
The survey of 2,000 UK adults shows Gen Z favoured crypto as their first investment, a move made by 33% of the cohort.
The report, The British Money Mindset 2026, says the danger of having a higher risk appetite early in your investment journey is that it could disproportionately expose younger investors to the volatility of crypto assets.
“Negative early experiences can discourage participation and reinforce misconceptions about investing,” it says.
Discretionary fund manager Albemarle Street Partners (ASP) suggests the main driver for this higher risk appetite is the need for their money to work harder, which stems from an early experience of inflation.
ASP managing director Charlie Parker says Gen Z is at a critical moment in life: coming of age, starting to take financial responsibility and pay their own bills, while at the same time they’ve been confronted with two enormous external disruption events.
“First, they had the pandemic and then they had the inflationary surge that followed.”
How inflation shapes your financial decisions
Behavioural economists suggest that experiencing a significant bout of inflation in a formative period of life can change everything about the way they think about saving, investing and risk-taking for the rest of their life.
Parker recalls the common shortage of hot water when he was growing up.
“If you wanted more hot water you had to approach your mum and ask to put on the immersion heater, which was like you were asking to burn liquid gold. Because my parents had come of age during the oil shock of the 1970s, lodged in mum’s psychology was this idea that energy ‘is the thing which is going to get me.’”
Today’s younger investors are facing their own challenges. According to Finder.com, in 2007, the average age of a UK first-time buyer was 30.3. Now, it’s 33.9. Home ownership is moving out of reach faster than this generation can save.
This leaves young people in a scenario where gradual savings into a “boring” multi-asset fund won’t cut it.
“They don’t think the world is working in their favour in order to do that,” says Parker. “So if they’re going to do any investing at all, it’s going to be a financial ‘prayer for redemption’. They’ll think, ‘I’m going to buy some cryptocurrency; something which gives me some hope that it might make me enough money to make a real difference’.”
Gen Z is investing at a younger age than any generation that came before them – more of them started in adolescence and early adulthood than other cohorts. They take more risks without necessarily knowing the consequences. Parker cites World Economic Forum data showing that 64% of Gen Z investors adjust and review their portfolio at least once a month.
As well as cryptocurrency, they are also the most active user group of alternatives, derivatives and non-fungible tokens.
What are the financial milestones at different ages?
As time works both for and against you as an investor, it’s a crucial factor in setting your priorities, whatever your age.
If you’re a Baby Boomer, some of the biggest moments are not financial but psychological. Navigating the transition to retirement is one of the biggest challenges for people in this lifestage, according to Parker.
Another shift that many Boomers have to contend with is acknowledging that they can spend their money. Many financial advisers say they’ve got clients who just can’t get their heads around drawing down from their pension pot while they’re not earning.
By age 65, half of people stop going abroad on holiday; it’s either too hard physically or emotionally. Healthy life expectancy in the UK is just 61.
“That’s not to say you’re bedbound. But there’s something going on with your health that makes things a little more difficult,” said Parker.
The average age of needing care is 84 and life expectancy is 83 for a woman and 79 for a man.
For Gen X, the pressure is on. If you’re in your 40s or early 50s, you’ll likely be earning the most money you’ll ever earn, perhaps have recognised that you can’t take your health for granted and that the workplace presents more challenges.
Parker explains: “If you’re in a physical job, you might be less able to do certain things. There are always fewer jobs at a more senior level than you. It’s quite easy to get to middle management but it’s harder to get beyond. The workplace can be an increasingly difficult and challenging place for people in their 40s and 50s and 60s, given technology and the pace of change.
“This is a generation that’s nearly running out of time to get the benefits of compounding, that’s in need of urgent intervention if pensions haven't been established, and good habits haven't been established in early life,” Parker continued. “They might still have just enough time to benefit from the power of regular contributions, but they need to act very, very quickly.”
