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Millennials Remain Far Behind with Savings

Millennials Remain Far Behind with Savings

| April 27, 2021
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49% of Millennials spend more on dining out per month than they put towards retirement.

A sobering statistic: LendEDU reports that 49% of millennials spend more on dining out per month than they put towards retirement (27% spend more on coffee). 

Why Millennials are Far Behind 

Despite our compulsory education system, United States classrooms devote minimal time to teach students about saving money. Millennials, age 23 - 38, earn on average approximately $47,000 per year, and since their debt has grown to over $1.7 trillion(with $29,000 in student loans per) saving money is not always top of mind or even feasible. Student loan debt, credit cards, stagnant wages, and living expenses equate to living paycheck to paycheck, sometimes with little savings at all. 
There are additional reasons which also exacerbate this norm. First, more Millennials are working in the gig economy, for small businesses, or completely independently, and therefore are usually not offered a 401k type retirement plan. Additionally, it has been evident that more younger workers are not staying with companies for extended periods, are more apt to be open to choosing new career directions, and thus suitably positioned by Gallup as Millennials: The Job Hopping Generation
Volatility in the job market due to COVID-19 has also played a significant role in financial woes. According to Morning Consult
  • 3 in 10 employed millennials say they’ve received a pay cut during the economic recession caused by the coronavirus pandemic.
  • Nearly 1 in 5 millennials say they lost their job due to the pandemic-induced recession.
  • Among all adults, 27% say they suffered a pay cut and 11% say they lost their job because of the pandemic.

Save Early 

The jury may still be out on whether or not the Millennial generation will benefit from longer lifespans, however, history provides at least some evidence that this demographic (the largest in the U.S. at about 80MM) will be living longer. Don’t think for even a moment that social security accruement throughout your career will be enough to live on in retirement. Millennials will likely have to work further into their 70’s to make up for the financial stressors of living longer. 

Consider this very small sample provided by John Hancock:  If you are 25 years old now, saving $200 a month in a retirement account and earning an average 7% return.* By the time you turn age 65, you would have accumulated $524,962.68 in the account and only have contributed a total of $96,000. 

Tips for Millennial Earners 

  1. Take advantage of the company offered 401K: It remains the easiest way to allocate untaxed dollars towards retirement, along with an employer contribution.(If your employer will match your contribution, this is a huge plus!)**

  2. Make a plan: Yes, you are decades from retirement but that doesn’t mean you can’t ask yourself a few simple questions: 
  • What do I want my retirement to look like, financially? 
  • Where will I live? 
  • Will you be taking care of elderly parents? 
  1. Educate yourself: 
  • Learn about savings rates
  • Understanding how to avoid unnecessary debts(including student loan debt)
  • The psychological aspects of money & peer pressure 
  • Keys to not overspending 
  1. Set up a budget: You can modify it monthly or annually as your salary and expenses change.

  2. Avoid credit card debt: We want to enjoy the feeling of spending money; and we also want to be good stewards and get our money to grow. The big question is how to balance it all on a budget? When we borrow on a high-interest credit card there is a feeling of regret the joy of the experience is often blurred by the debt accrued by the expenditure. You can have a small percent of your income allocated as an entertainment fund, but the lion share should be used to build assets and pay bills.

_ _ _ 
*This example is hypothetical only, and does not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested.
**Distributions from traditional employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty.

Learn more about FiscaleFit — our self-directed financial planning resource to help you gain financial clarity and position every dollar to make the most impact in your life. 

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