Growing up during a recession has made millennials very good at saving money. Their primary motivator? Emergencies.
This month, Bankrate called about 1,000 millennials to ask them how much money they were putting aside, and the results were surprising. The country’s youngest grownups — in the 18- to 29-year-old range — are actually the best at filling up their piggy bank, NBC News reported.
In a statement that shatters stereotypes about the generation, Bankrate’s chief financial analyst Greg McBride told Fiscal Times that they aren’t voracious consumers like their parents were.
“Because the financial crisis occurred during financial formative years, they don’t have the same consumption mentality as their predecessors. (Older generations saw) plenty of boom times where the stock market was going up, home prices were going up, so they didn’t feel they had to save. What resonates with Millennials is that markets can go down too.”
They also entered the job market during a slump and probably had a pretty hard time getting and keeping a job, which also inspire them to save, rather than spend, their hard-earned money. At the same time, McBride said they also likely watched family members get laid off left and right, the Washington Post added.
“There is a greater inclination toward saving among millennials than we’ve seen in previous generations.”
The stats are encouraging. About 62 percent are saving more than 5 percent of their pay; last year, about 42 percent of them did so. These young people are also doing better than older generations. Only half of people aged 30 to 49 are reportedly saving as much, and a quarter in that age group aren’t putting aside a thing.
McBride said people really should be saving 15 percent of their money, so 5 percent is the bare minimum. But in that category, millennials are killing it, too. Three in 10 are saving five percentage points more than that minimum, which puts them on par with everyone else.
So how are they able to put money aside for a rainy day? Financial planner Karen Carr said many young workers have likely shifted from part-time to full-time jobs recently and others landed a promotion or raise. And more of them are employed than the year before; the unemployment rate for those aged 20 to 24 fell a full percentage point over 2015.
Moreover, everyone’s wages increased 4 percent over last year as well. About 27 percent of Americans reported a higher net worth today than last year, but millennials were five percentage points more likely to feel more secure in their jobs than in 2015.
And as a group, saving money is primary in millennials’ minds. The majority save money for emergencies and the rest for a big purchase as they grow up and settle down. Other reasons: to pay for a vacation, to buy a house, or a car.
And among all life goals, saving money was a firm number one for the generation. Fewer people in that age group were concerned about living a healthy lifestyle or paying down their debt.
While the data about millennials was encouraging, McBride was disappointed that older Americans weren’t being as prudent. Since they’re closer to retirement, they’re risking financial insecurity down the road. But it’s not entirely their fault.
“People recognize how important savings is and that it’s a much higher priority, but the problem for a lot of people is that income hasn’t gone up,” McBride said.
Nonetheless, people with lower incomes (between $30,000 to $50,000) are more likely to put aside more than just the minimum than those who bring home far more bacon.
“There’s a recognition that nobody is going to do that saving for them. They’re rolling up their sleeves and doing it for themselves.”
[Image via Melpomene/Shutterstock]