By Dan Kadlec
November 12, 2015
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Boomers may have spurred the mutual fund industry, but millennials are embracing it at a far younger age—plunking down their first dollars a decade earlier in life, new research shows.

The average age that millennial households started investing in funds is 23, according to the Investment Company Institute. That compares with age 37 for older boomers and 32 for younger boomers. Gen X started at age 26.

The latest results echo earlier research from Transamerica Center for Retirement Studies, which found that millennials began saving at a median age of 22, Gen X at 27, and boomers at 35. Yet it doesn’t tell the whole story.

Mutual funds, as we know them today, date to 1928. But their numbers did not soar until the 1980s—well after the first boomers entered the workforce. Those boomers were promised pensions and felt less pressure to save. Meanwhile, to the extent they wanted to invest their own money for long-term growth it was a difficult proposition. Individual stocks were their primary option.

The Revenue Act of 1978, with a section called 401(k), changed everything. The oldest boomers were then 32, and it wasn’t long before there was a steady flow into this newfangled product. The 401(k) plan became a gateway to mutual funds and helped take fund assets to $16 trillion today from less than $50 billion in the late 1970s, according to the ICI. Today we have nearly 8,000 mutual funds, compared with fewer than 500 in the mid-1970s.

Many boomers seized the opportunity to invest this way as it became available. Today they represent 40% of all mutual fund owning households—the largest share of any generation. Gen X makes up 32%, while millennials make up just 16% of mutual fund owning households, ICI reports.

None of this diminishes the impressive job many millennials are doing in getting started early. Eight in 10 millennials say the recession convinced them they must save more now, and more than half are putting away money regularly, according to Wells Fargo. They are taking advantage of their 401(k) plans for tax-deferred growth, using the automatic escalation feature to increase contributions, and target-date funds to remain diversified and practice sound asset allocation. Their early start gives them a huge advantage over boomers: an additional decade of growth that has the potential to double their nest eggs so that they’ll never miss the pension they never had.

Read next: How Millennials and Boomers are Killing Gen X Retirement Savings

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