Study: 31% of Young Millennials, 33% of Older Millennials Have No Savings
Posted By Terri Williams on October 13, 2016 at 3:36 pm
Saving money may be easier said than done for millennials. Between the cost of college, student loan debt, and trying to secure steady employment, many millennials don’t make savings a priority. A new GOBankingRates.com survey supports that thesis.
Below are excerpts from the report:
|SAVINGS AMOUNT||Young Millennials (18-24)||Old Millennials (25-34)|
|Less than $1,000||41%||34%|
|$1,000 – $4,999||15%||13%|
|$5,000 – $9,999||4%||5%|
|$10,000 or more||8%||15%|
Interestingly, a lower percentage of young millennials have $0 in savings than young Gen Xers (35%), old Gen Xers (37%), baby boomers (33%), and seniors (33%). What’s more, a higher percentage of young millennials also have $1,000-$4,999 in savings than any other group.
Savings by income level
|SAVINGS AMOUNT||ACROSS ALL AGE GROUPS|
|$0||38% of those earning less than $25,000|
|37% of those earning between $25,000-$49,999|
|33% of those earning between $50,000-$74,000|
|24% of those earning between $75,000-$99,999|
|Less than $1,000||35% of those earning less than $25,000|
|35% of those earning between $25,000-$49,999|
|36% of those earning between $50,000-$74,000|
|38% of those earning between $75,000-$99,999|
|$1,000 – $4,999||12% of those earning less than $25,000|
|9% of those earning between $25,000-$49,999|
|12% of those earning between $50,000-$74,000|
|16% of those earning between $75,000-$99,999|
|$5,000 – $9,999||4% of those earning less than $25,000|
|3% of those earning between $25,000-$49,999|
|5% of those earning between $50,000-$74,000|
|8% of those earning between $75,000-$99,999|
|$10,000 or more||11% of those earning less than $25,000|
|14% of those earning between $25,000-$49,999|
|15% of those earning between $50,000-$74,000|
|24% of those earning between $75,000-$99,999|
Explaining the dismal savings report
Jeffrey Jensen Arnett, research professor of psychology at Clark University, isn’t surprised by the survey findings. Arnett tells GoodCall that millennials barely make enough to live on, let alone, enough to save. “More of them stay in school for longer than any previous generation, which limits the money they can earn, not to mention the cost of education.”
And when they enter the workforce, Arnette says it will take roughly four years to find a steady, well-paying job. “Most millennials will be working through their sixties and into their seventies, so they’ll have plenty of time to save once they find their footing in the work world.”
Millennials may also have higher bills that those in previous generations. According to Keith Baker, a mortgage banking professor from North Lake College, “Millennials must pony up for apartment rentals now that they have moved out of their bedroom at home, and here in the Dallas (Texas) area, the average rent increased more than 5.8 percent over the past 12 months.”
Baker also points to the aftermath of the Great Recession, which has resulted in unemployed or underemployed millennials. Research reveals that many students are graduating to low-quality, low-wage jobs. And of course, there’s student loan debt. Baker says, “The average amount of debt that younger millennials have taken out for college has gone up dramatically — new graduates in 2016 are estimated to have an average of $37,172 in student loans, up 6 percent from last year and nearly double the average of $20,450 in 2008 at the beginning of the recession.”
What’s worse: There’s a recent report recommending that parents cut financial cords with millennials to help them develop financial independence.
A millennial perspective
GoodCall asked Rayma Williams, a recent college graduate and a Jackson, TN-based music therapist, to weigh in on this topic. “I believe that I have adequate savings due to my occupation’s pay and my personal standard of living – not having to stay up-to-date on technological advances.” However, she says that many of her fellow millennials have little-to-no savings.
“This is due, in part, to the pressure of trying to stay up to date with technology through cellphones, gadgets, television, and also newer cars – but also with struggling to find jobs immediately after college graduation that can fully support an independent lifestyle.” Williams says most millennials she knows are swimming in debt. “Most of the debt is primarily the result of student loans or because they moved to a city with a high cost of living, but they work part time or have low-rate starter jobs.”
Many young people think they have plenty of time to save for retirement, or they may think they can’t afford to contribute to retirement savings, but Richard Ludlow, executive director of myRA at the U.S. Treasury, tells GoodCall that it’s critical for young people to begin regularly saving, including for retirement, when they’re young.
However, he says that young employees are less likely to have access to workplace sponsored retirement plans, but myRA is designed specifically for those types of workers. “There’s no cost to open a myRA account, and the account is backed by the U.S. Treasury so it safely earns interest,” explains Ludlow.
So what does this program entail? “It takes just minutes to sign up online and new savers can contribute as much or as little as they want via direct deposit from a paycheck or through automatic transfers from an existing checking or savings account,” Ludlow says. He adds that they can roll their balances into private sector IRAs at any time.
For millennials who don’t think they can start saving for retirement, GoodCall asked Jim Poolman, executive director of the Indexed Annuity Leadership Council, for advice. Poolman provided the following tips:
- Contribute what you can, even if it’s only 1%. When you’re young, you have time on your side, so put as much money aside as you can. This might mean skipping a night or two on the town or packing your lunch more often. While this doesn’t seem like much, making one or two small changes can add up to considerable savings.
- Take advantage of free money. Consider contributing to your company’s 401(k) plan or any employer-sponsored plans available. Think of any match your employer is willing to make as “free money.”
- Set up automatic transfers. While it’s easy to promise yourself that you’ll transfer money to a savings account each month, it’s helpful to set up automatic transfers so you aren’t tempted to spend the money.
- Make a game plan for saving. Contributing regularly to retirement savings is not the same as a savings plan. Those who plan for retirement are estimated to save three times more than those who don’t. Take the time and set a strategy to achieve measurable financial goals.
- Mix it up. Don’t rely solely on one form of retirement savings, such as a 401(k). In fact, the U.S. Department of Labor notes that diversity is important when it comes to retirement savings because it can actually help to reduce risk and improve return. Incorporate low-risk options to ensure your portfolio is balanced.