Millennials are saving money and are obviously more responsible than adults when putting five percent of their income away. The data was revealed from a new study by Bankrate.com and the numbers are based on telephone interviews with a nationally representative sample of 1,000 adults conducted in March 2016.
Although Millennials are saving early, they’re not starting big. Just a little over a quarter are saving more than 10% of their incomes, while 32% of people aged 30 to 49 are saving more than 10 percent.
Greg McBride, Bankrate.com’s chief financial analyst, attributes Millennial’s inclination towards saving to growing up during the financial crisis. “Because the financial crisis occurred during financial formative years, they don’t have the same consumption mentality as their predecessors,” McBride says.
And while more Millennials are saving money, 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,” McBride says. “What resonates with Millennials is that markets can go down too.”
The ideal savings rate is 15 percent of one’s income, according to McBride. Even though that might seem like an impossible feat for many people, McBride advises getting up to 10 percent as soon as possible and then working up to 15 percent.
About 16% of workers are saving more than 15% of their income, an increase from 14% last year. Although still nowhere near what it should be, the Millennials are headed in the right direction.
Even though McBride found the overall report encouraging, one disheartening finding was that more than one fifth of Americans aren’t putting any money away for their future. “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 says.
People in higher income brackets generally tend to save more, but the report found that high income isn’t a prerequisite for saving. A greater number of Americans who make between $30,000 and $50,000 save more than 10 percent of their income than those who make between $50,000 and $75,000.
“There’s a recognition that nobody is going to do that saving for them.” McBride says. “They’re rolling up their sleeves and doing it for themselves.”
In other good news for savings, the Commerce Department reported on Monday that the personal-saving rate jumped to 5.4 percent in February, up from 5.3 percent a month prior. The rate is now at its highest level since the end of 2012.
McBride advises to keep in mind that while the Millennials are saving money, this statistic is an aggregate figure and that it doesn’t necessarily translate to the household level. What’s important about it is the direction it’s going in.
Millennials have shown the greatest increase in their savings rate compared with any other generation, according to new data from Fidelity. The typical 20-something is now stashing away 7.5% of income vs. just 5.8% in 2013. Generation X and boomers are still saving larger percentages of salary but have not stepped up their contributions by nearly as much.
That year, Fidelity found that 38% of Americans were prepared for retirement. In 2015 that number jumped to 45% as a result of better saving and investment allocation, the analysis shows.
“Even in the midst of unsteady market conditions and pockets of global instability, it’s extremely encouraging that so many people have taken positive steps to improve their ability to live comfortably in retirement, with many saving more, spending less and making smart investment decisions,” says John Sweeney, executive vice president of Retirement and Investment Strategies at Fidelity
It looks like Millennials are making good on their pledge to save more, even though they’re three times more likely than older generations to justify spending on experiences.
Younger workers still need to put more money away, however. Millennials’ retirement preparedness score is 12 points below baby boomers, who are nearing retirement or already there. But Millenials have nearly caught up to Gen X, whose score is only three points higher.