A recent survey conducted by Wells Fargo showed that 80% of Millennials say they understand the importance of saving. They believe in living below their means and they claim coming of age in the Great Recession has taught them how to survive tough financial times.
This is great news, right? Seems like those media outlets who claimed retirement wouldn’t be possible for Millennials, or who said that Gen Y were bad money managers, were wrong after all.
Not so fast.
That same Wells Fargo survey showed that 8 out of 10 Millennials know they should save also showed that only about half of them (55%) are actually saving at all.
So if Millennials know they should save, why aren’t they doing it?
Student Loan Debt Eats Away at Discretionary Incomes
One of the biggest reasons 45% of Millennials aren’t saving anything could be due to the amount of money they must repay because of the student loan debt they racked up in college.
42% of Millennials claim that debt is their biggest financial worry, while 40% say it’s completely overwhelming. And 55% of Millennials say they’re living paycheck to paycheck.
Specifically, 29% of Millennials say that paying off student loans is their number-one concern after regular monthly bills are paid. Compare this to older generations, like Baby Boomers, who say that their biggest concern is saving for retirement.
Gen Y’s answer should be the same, and the survey indicates they know this. But it seems there’s no saving for retirement until the weight of student loan debt that must be repaid is eliminated.
All Millennials Know They Should Save — But Men Save More
Another issue the survey brings to light is the fact that Millennial men seem to be pretty far ahead of Millennial women in both earnings and saving.
Where 55% of Millennials say they’re saving, it’s not an even split between male and female members of Gen Y. 61% of Gen Y guys claim to save, while only 50% of Gen Y women say the same. And while 58% of Millennial men say they’re satisfied with their savings, only 41% of women feel satisfied about theirs.
This makes more sense when you look at the difference in earnings: college-educated Gen Y males report a median income of $83,000 and college-education Gen Y females report a median of $63,000.
Why We Aren’t Saving
So what are we to make of all these numbers?
It’s awesome that Millennials want to save. We want to increase our financial education and we’re seeking out answers to our questions about money and how to do more with it.
When you account for monthly bills and Millennials who are playing catch-up with major life goals they may have initially put off (like buying a home and getting married), and combine that with the money required for debt repayment, there just isn’t that much left to go towards retirement.
And the ladies are earning less, which makes it that much more difficult to manage debt and save.
That answers why we aren’t saving right now. But that doesn’t explain what we need to do about it to solve this financial problem.
How More Millennials Can Save — and Get Ahead Financially
There are a few different ways we can approach the issue of Millennials not being able to save.
The first, and most obvious, is to aggressively eliminate debt so that financial burden no longer eats into our monthly income. Once we free up more money each month, more can be contributed to retirement savings.
To do this, we can:
- drastically reduce expenses while in debt-repayment mode. No, it’s not fun, but it’s necessary while finances are in trouble.
- avoid lifestyle inflation. Any raises earned should be used to pay down debt faster (or added to savings once debt is gone).
- earn more money. While we can all save a little here and there and cut costs, there’s only so much we can do to eliminate expenses. But we can all work and hustle to boost our monthly incomes.
- look into debt repayment or loan forgiveness programs as a last resort. If you feel there’s just no way you can manage your student loans on your own anymore, look at what programs are available for your federal loans from the government. This course may make the most sense if you’re working in the public sector, because there’s a program available that will forgive outstanding loan balances after 10 years and you won’t be taxed on that forgiven balance.
The next step, once we’ve freed up some cash to put towards savings each month, is to ensure we actually make it happen:
- Make savings and retirement contributions automatic.
- Do everything you can to max out various accounts. Don’t just settle for your employer’s 401(k)! You can open your own IRA, too or contribute to other, general, taxable accounts that are invested wisely.
- Whenever we find an expense to cut or additional money in our incomes, put that straight into savings or investments to ensure you’re growing your wealth — and not just the amount in your checking account that will be spent.
What do you think Millennials could do in order to save more?
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Source for data and statistics cited: 2014 Wells Fargo Millennial Study