Millennials Aren’t Saving – Is it Oversight or Inevitable?
November 28th, 2017 by Bunch & Brock
According to Wells Fargo Investment Institute, 41 percent of Americans ages 17 to 35 aren’t saving for retirement yet.
Millennials aren’t saving.
This news comes at a time when many Baby Boomers are fearing they’ll have to work for a few years longer than they’d planned in order to afford retirement.
One possible reason for the failure of the Millennial generation to start saving may be that, on average, Millennial households earn 20 percent less than the Baby Boomers did at a similar stage in life. Lower incomes are certainly a contributing factor, but there are other possible reasons for the lack of saving behavior among Millennials.
Why aren’t Millennials saving?
Debt is one major reason for the drop in saving among Millennials. Debt in general, and student loan debt in particular, is a serious drain on Millennial finances. With almost 34 percent of Millennials having at least some student loan debt (and a median balance of $20,000), many members of the generation are having a difficult time paying off the debt and saving for retirement.
Another possible factor is the lack of financial education at the high school level, or even at the college level. Many Millennials are introduced to things like debt payments, credit cards, and monthly bills only when the time comes for them to do them. They’re not taught in school, and many people are embarrassed to talk about financial topics in their personal lives. A little institutional support in the form of a required finance class in high school (or even as a university general education course) could go a long way in ensuring financial literacy in upcoming generations.
One other angle on the lack of Millennial retirement savings shows up when we realize that Millennials are saving, just not for retirement. Millennials are more likely than previous generations to save for experiences, such as travel. The average Millennial spends $2,915 per year on travel, and that figure is expected to rise as the generation earns progressively more over the years.
So even though Millennials are saving, the funds are not intended for retirement. They’re more likely to be used for the next vacation or the first house than for retirement—which is still at least 30 years off, even for the oldest members of the generation.
And don’t forget: If 41 percent of Millennials aren’t saving for retirement yet, that means 59 percent of them are. So the generation as a whole is at least getting into the habit of saving. More to the point, the individuals in the Wells Fargo poll were aged 17 to 35. That means on the upper end we’re talking about established professionals already well into their careers, but on the lower end we’re talking about juniors in high school.
Yes, some Millennials will run into some trouble, but there’s no reason to panic.
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