Younger investors are stressed and feel financially insecure— at least that's the takeaway from recent research conducted by Janus Henderson, the Financial Planning Association and Investopedia.

In the wake of a slow recovery from the 2008 financial crisis, rising student loans and stagnant wages, young peoples' anxiety makes sense. Those factors, which contribute to their stress, impact millennials' wallets as well. A recent survey by consultancy EY indicates that 53% of millennials are making either not enough or just enough to cover their expenses, leaving nothing left to invest. As a result, the well intentioned advice of financial planners, who extol the virtues of dollar cost averaging and the benefits of compound interest for younger investors, frequently falls on deaf ears.

Stress is affecting other areas of their lives as well. Younger respondents indicated that stress had a "significant" or "moderate" impact on their mood, success and health.

“Chronic stress impacts risk-based decision-making— impairing complex, flexible reasoning, and pushing us toward more rigid and habit-based actions,” says Joetta Gobell, Ph.D., vice president of research and insights at Dotdash, Investopedia’s parent company. “This kind of cognitive impact can potentially lead to sub-optimal decisions around investing that unfortunately only further compound or extend the stress.”

The survey, titled The War on Stress, was conducted online between December 2018 and January 2019. Janus Henderson, the Financial Planning Association (FPA) and Investopedia polled 336 investors and 313 financial advisors to gauge their current stress levels across their personal, professional and financial lives. Respondents were asked to report their levels of stress, identify major stressors and discuss preferred coping mechanisms. Financial advisors were also asked about workplace stress and client satisfaction.

Effects of Great Recession Still Resonate

Of respondents under the age of 35, half reported feeling somewhat or very concerned about coping with the effects of a market downturn. While their responses were broadly in-line with those of of older respondents, the findings are counterintuitive. Unlike their older counterparts nearing or in retirement, younger people are generally less reliant on income from their portfolio and have a longer horizon to recover from a downturn.

While the exact causes of stress are difficult to pinpoint, it’s noteworthy that a number of financial stressors have coalesced around the youngest respondents in the survey. Having entered the workforce near the time of the financial crisis, respondents under the age of 35 show increased anxiety about their jobs, as well as their personal and financial prospects.

Though unemployment rates have fallen significantly since the financial crisis, wage growth has not increased at the same rate. At the same time, the inflation-adjusted starting salary for recent college graduates is still more than $2,000 lower than its pre-crisis high, according to data compiled by the National Association of Colleges and Employers.

Perhaps as a result, younger investors are more likely to report being dissatisfied with their financial situation, with 32% of respondents under the age of 35 indicating as such. Older investors report higher financial satisfaction: only 9% of 65+ year old respondents reported feeling dissatisfied. Financial burdens that may not have been present for previous generations, such as substantially higher levels of student debt, may make the outlook less rosy for younger investors.

Stress is a Mental and Physical Burden

Beyond investing habits, survey respondents also associated increased stress levels with lack of motivation, inability to make decisions and distraction, among others.

While younger investors reported feeling as though they needed to reduce their stress levels at higher rates than their older peers, as well as feeling uncomfortable with the level of stress that they’re experiencing, stress was an issue for nearly every group polled. All sets of investors that have not yet reached retirement reported being concerned about retirement, spiking among investors in the 35-44 age bracket.

Hope for a Solution

Despite a longer time horizon for growth and recouping losses, the 2019 War on Stress survey identified a notable difference in the mindsets and stress levels between younger and older investors. However, the results also indicated there may be a salve to millennial money woes. Investors who reported feeling financially secure and had financial goals were significantly more likely to report feeling lower stress, indicating that financial literacy and an established plan may have an effect on reducing stress.

These findings suggest that establishing a financial plan, setting and meeting goals and developing financial literacy may be a key factor in reducing stress for investors of all ages, but particularly younger generations still reeling from the effects of the financial crisis.