Millennials are thought to be careless with their money, spending more than other generations on items such as organic food, craft beer and cocktails, and basically anything made with a story attached to the creation. Though these items carry a higher price tag, along with the city-living lifestyle, one would think there would not be much left over in the bank, but it turns out their bad rap is unjustified. According to a new study from Bankrate.com, millennials, which are defined as those generally between the ages of 18 and 29, are now carrying less debt than ever before, and are actually building their savings accounts at the same time, even more than previous generations.
The survey shows that 62% of millennials are currently saving more than 5% of their paycheck to put towards retirement, or other financial goals such as emergency savings accounts, which is even 50% more than those savings as much between the ages of 30-49. The amount of millennials is up substantially from the 42% last year, which can be sited as those saving the minimum of less than 5% of have since increased savings, falling from 37% to 19%. Even those that are now saving a larger portion of their paychecks, between 6-10% have increased from 20% in 2015 to 33% in 2016.
There are a number of possibilities that could be attributed for the recent shift in saving habits. First, given positive state of the economy, the younger millennials that have recently graduated from college are now moving from part-time to full-time positions and are instantly given access to a greater pool of funds to start saving right away. Next, those older millennials that have been in their field for a couple years are now getting raises and promotions and are being smart and adding to savings instead of taking the extra money and using it for spending.
They have been more in tune with improving and maintaining their credit scores versus the previous generation as well. They understand that their credit score is the key to unlock the door to affordable credit, which in turn often leads to more disposable income to save and invest. Consider all of the lines of credit that require a good score, like your mortgage, credit cards, and even vehicle title loans.
The extra motivation for being financially responsible could start with the fact that millennials watch their families get hit first-hand when many family members lost jobs, retirement savings, and even homes during the financial crisis when they were young, so having an emergency fund is important to have just in case. Others are beginning to move out of their parent’s house or a rented apartment and are looking for home purchase, or even those beginning to think about purchasing an engagement ring. The future actually seems to be in good hands.