As the economy has recovered the statistics are clear that Americans are beginning to increase their savings. What might surprise you is that the group that is saving the most are the much maligned millennial generation. Recent statistics show that over 55% of millennials between 18-34 save at least 5% of their income, while 45-54 year olds only have 53% saving 5%. After looking at the terrible job market for young people, the lack of growth in wages, and the increasing amounts of school debt that millennials have taken on it might seem like it would be impossible for this young generation to save at such a high rate, but if you dig into the details it makes sense.
Younger people have begun to see an uptick in hiring at jobs that can bloom into careers and as such are making more money and have the confidence to finally move out of their parent’s basements and begin to make larger purchases. With this newfound optimism they’re looking at what they need to do to begin making mature financial decisions and one of the first items is to begin to save money for retirement and for emergencies.
Millennials are saving more not only because they are just beginning careers, but also because they’ve weathered such a tough job market for the last several years. They have seen first hand how important it is to live frugally and to keep money saved for emergencies. They’re much more wary of the job market and are much more conservative with how they save their money and what they invest in than prior generations that did not enter the job market with such significant student debt and such poor job prospects.
It’s not all doom and gloom for millennials that drives their saving habits. Many of them cite that they want to be able to make large purchases like a car, or a home in the near future. Although many of them now have jobs and decent salaries they tend to avoid credit cards and traditional forms of credit through banks are tough to come by. If they want to buy a car or a house they’re going to need to drop significant amounts of money on a down payment. They also say that they are saving more to try and catch up from the years where they were not working or were earning much less. This generation is acutely aware of how compound interest works and how important it is to save for retirement as early as possible.
While older Americans are also saving more money than during the height of the recession, they might want to take notes from the younger generation and ramp up their savings.