Millennials: savvy savers or self-absorbed spenders?
Written by Jordan Donald on October 03, 2018.
A 2018 Bank of America survey caught my eye recently for its different take on millennials. While the millennial generation – defined here as 23 to 37 year olds – are often portrayed as self-absorbed social media junkies and profligate spenders who live for the now and fail to plan for the future, the Better Money Habits Millennial Report suggests that they are being done a disservice.
It turns out that American millennials are ‘just as good, or better, than other generations when it come to managing money, and they are getting their financial houses in order.’ Here’s some of the positive takeaways from the report:
63% of millennials are saving
54% of millennials are budgeting
57% of millennials have a savings goal
59% of millennials feel financially secure
Those are pretty good stats which paint an encouraging picture.
Over on Planet GoBankingRates, things don’t look quite so rosy. Their 2017 survey revealed that most young millennials (18-24 year olds) have less than $1,000 saved with over 50% having a big fat zero balance in their savings accounts. And the percentage of those with nothing is rising – it jumped from 31% in 2016 to 46% in 2017. The same was true of older millennials (25-34 year olds for the purposes of this survey) with 33% having no savings in 2016 compared to 41% in 2017.
Well, they do say that you can prove anything you like with statistics! The truth is that, as with any other generation, some millennials are savvy savers, others are not, but they do remain the generation most likely to have nothing saved. Does that make them self-absorbed spenders? Well, I think they get a bad rap on that front – with many paying off hefty student loans, 25% working in the notoriously insecure gig economy as freelancers or short-term contractors and 25% having been laid off (according to the Bank of America survey) they do have some serious financial challenges to overcome. In addition, 35% of millennials say not saving enough is their number one financial worry which shows a will even if they can’t find a way.
But find a way we must. Saving has to be a priority for anyone who takes their financial future seriously even those with limited disposable income. If we don’t save we won’t be prepared for life’s lemons such as getting laid off or sick or even being able to replace a car which has given up the ghost, we will never become homeowners, we will struggle to educate our kids and we certainly won’t have a comfortable retirement.
How much you need to save is highly personal and will depend on your life aspirations but there are some general rules of thumb which many advisers seem to agree on. The most important one is to start early so that you can benefit from the power of compounding. Having the equivalent of your salary saved by the time you are 30 is another common one, building to 10 times your final salary squirreled away when you come to retire.
In truth, I prefer to take a more personalised approach with my clients by spending time with them to understand exactly what their financial goals are and working back from there. If you’re a millennial looking to become a savvy saver, why not drop me an email at firstname.lastname@example.org to arrange a chat? Together we can get your financial house in order with an achievable savings plan and investment products which work for you.