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Millennials Are Great at Saving Money but Reluctant to Invest It That market crash when they were growing up probably has something to do with it.

By Henri Steenkamp Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

Anchiy | Getty Images

A millennial is anyone born between the early 1980s and 2000, give or take a few years. The group before them is known as Generation X. And recently, a small slice in-between (1977-1983) was defined as xennials. Millennials are the largest group in history -- bigger even than baby boomers. The group includes more women, and is more racially and ethnically diverse than any group before, according to the U.S. Census Bureau (which counts millennials as 1982-2000). This gives millennials a lot of financial power, but they aren't wielding it yet.

Related: 3 Things Anyone Can Learn From Millennials' Financial Habits

But one place millennials shine financially is savings. Three-quarters of millennials have savings, and they started earlier than previous generations. But when it comes to investing that money in a way that could create greater returns, the opportunity is getting lost. Nearly 80 percent of millennials are not investing, especially women. There are several best practices to get this generation on track.

But first, what's holding millennials back? Many people cite that this group has struggled with fewer jobs and higher debt. Moreover, they've been victims to some unfavorable imagery, such as when Time magazine called them the "me me me" generation. Some of this misunderstanding is also due to their position as digital natives, using technology that confuses older generations with an ease and frequency.

There's one last thing that we're forgetting. Think about how many films and TV shows depict the trading floor as it was in the 1990s boom era or the 2000 crisis with people in suits answering phones, throwing stacks of paper into the air and staring at large computer monitors. The recession was part of their formative years. Is it any wonder that many young people associate investing with their parents and other products of the '90s? Until we update the image of the financial markets, millennials may continue to associate stocks with other '90s icons such as the Game Boy (1989) and Tamagotchi digital pet (1997).

It's time for millennials to start investing, even if they start off small at first. Here are three key steps.

1. Utilize employer and government programs.

A 401(k) or Roth is usually thought of as a retirement account, but it's still money that is invested in a mutual fund comprised of stocks, bonds and other investments. When it's available, contributing to an employer sponsored 401(k) is a good idea, especially if it's matched by employer contributions.

Related: Which is Better: an IRA or a 401K?

The next option, especially for those self-employed, are IRAs. IRA stands for individual retirement account, and the most popular are the Traditional IRA or Roth IRA. For both the Traditional IRA or Roth IRA, the maximum annual contribution is the same. A Traditional IRA does not have taxes taken in the beginning, but money can't be withdrawn until retirement age except under special circumstances. A Roth IRA is taxed at the time of investment, but qualified distributions of the money are tax-free later.

Many people utilize a mix, or all, of these options. There are other IRA options including the Spousal IRA and MYRA, each with restrictions and benefits that are worth examining.

2. Track financial health as often as physical health.

People are more comfortable with data these days because of devices that track sleep or steps, as well as the number of popular apps to monitor spending with graphs and pie charts. Millennials also use technology to research while they shop, including reading reviews, comparing prices, checking product information and paying with online banking.

These habits can be translated to investing. Finding a low-fee option is a priority for those starting small. Shop around for the right option, because new sites and tools are appearing each year. Sites like Mint and LearnVest create financial plans tailored to each unique situation and can be used to monitor savings and spending in addition to planning investments. Some of the more common investment options include Ameritrade, E*Trade and SigFig. One novel investment app is Acorns, which sets aside change for investing by rounding up on each purchase made.

3. Apply the sharing economy to investing.

Millennials are used to sharing major financial expenditures instead of purchasing them, including sharing homes when they travel and borrowing cars through apps rather than buying them outright. Investing can be a community effort, too.

Related: 8 Ways Any Millennial Can Be a Millionaire in 5 Years

One way to support community is through business development companies (BDCs), which pool money to create investment capital. Before the creation of BDCs, only the very wealthy could afford such investments. BDCs focus on lending to middle-market American businesses, who use the money to expand their business, create jobs, and support the local economy.

Education is available online as never before -- for people at every stage and for free. This access to information also means a conscious investor can make sure their money is going towards a company whose values they support. Plus, they can monitor the investments through their phone. By combining their existing habits and skills, millennials can invest easily and start contributing to their financial futures.

Henri Steenkamp

CFO of Saratoga Investment Corp.

Henri Steenkamp is CFO of Saratoga Investment Corp., a provider of financial solutions to middle-market companies. Follow him on Twitter and read his thoughts on his finance blog and South Africa blog.

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