Just like orange is the new black, millennials are proving that saving is the new spending.
Our generation has some unique challenges on our financial plate: we are shackled with more student loan debt than any generation before us, we graduated (in large part) into the worst job market in recent decades, and what jobs we could find paid lower or were fewer hours than before the recession.
Finding the money to pay off loans and afford rent can be a big enough challenge, let alone trying to find the money to save. Yet, we’re doing it!
While many millennials still say that saving can be difficult to do, those who are saving are doing so at a higher rate than almost everyone else in the US.
Millennials Are Increasing Their Savings
56% of millennials are saving at least 5% of their income, compared to 52% of Americans in general. In the last year, millennials have also gotten smart to the idea of an emergency fund. 64% of millennials now have one, compared to last years 53%.
These are fantastic numbers for our generation to be putting up.
I don’t have a glamours salary by any means, and who knows if or when that will change. Yet, I prioritized creating and maintaining an emergency fund of $2,000 for myself last year. I wanted the security that comes with having money stashed away somewhere. More and more of my peers are coming to that conclusion themselves.
Why are we getting our act together when it comes to saving? Personally, I’m still a little scarred from the Great Recession. Staring down a pile of debt when you have no consistent stream of income or job security is terrifying.
Hard as it may be to find the money to tuck away when you live on a small income, the peace of mind and sense of security that comes from having savings is worth it. The more distance we can put between ourselves and a zero balance, the less likely we will be to fall into consumer debt, or to face unemployment without a safety net.
What This Means for Retirement
Thinking ahead to the golden years of retirement, many millennials don’t think of pure luxury. We aren’t going to have the benefits our parents and grandparents had, like pensions and social security. Not being able to count on those means needing to count on ourselves even more.
We learned to get by on less early on in our adult lives and careers: mason jars serve as both storage and glasses, we live with roommates for longer to save cash, and we turn to bikes or walking as transportation more readily.
So for many among us, we don’t need a castle for retirement or a personal driver to take us to water aerobics. We simply want security after a lifetime spent working. Saving now is the key to that: the more time we give our investments to grow, the larger our cushion will be when we say adios to the workplace.
Saving Gives Us Options
Savings not only lead to security and peace of mind, but also to options.
If you have a chunk of change stashed away in a savings account, you have investment options. (And if you don’t, you should be saving with us!)
Similarly, you’ll have some flexibility with your job. If you don’t enjoy it, or feel you aren’t getting paid what you’re worth, you may be inclined to drive a hard bargain knowing you’ve got three months of living expenses in the bank should things go south. You can negotiate in a way you just can’t when you’re living paycheck to paycheck.
A generation of savers is a good thing for everyone. Obviously, each individual reaps the benefits of their personal savings, but collectively, it helps the country out. In very simple terms, it works like this: people who put their money in the stock market help keep it growing. This encourages others to invest, which makes the stock market grow even more.
Additionally, when you put money into a savings account, banks lend that money out. It goes to businesses, who can hire more people or invest in new ideas with their capital. While on the surface it may seem like spending is what drives business, savings actually do a lot of heavy lifting. Savings affect things like interest rates on business loans and mortgages, too.
So here’s to us, a generation of savers who are helping themselves and their country bounce back from a rough patch. We are a unique group of money makers and users, but it seems like we are on our way to being a responsible group, too!
How do your savings compare with the statistics? Do you think millennials are becoming more driven by saving?