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Millennials Just Saying No to Saving


Millennials Just Saying No to Saving

What’s going on with the Millennials? Between September 2013 and 2014, the personal savings interest and effort of those 18-34 surveyed, declined considerably, according to the latest America Saves Personal Savings Index.

During this time period, interest in personal savings in this age group fell from 77% to 68%, while the reported savings effort dipped too, from 66% to 57%. In effectiveness they fell too, from 60% last year to 57% last month.

"It’s not easy to explain such a huge decline. Rarely in large surveys do the values and behavior of respondents change so dramatically in a relatively short period of time," says Stephen Brobeck, executive director of the Consumer Federation of America and founder of America Saves.

He surmises that the well-publicized economic and financial struggles of young adults related to their job prospects and realities, as well as mounting student loan debt are contributing factors. "It’s also likely that these economic realities have, over the past year, had a psychological impact, with young adults growing much more pessimistic and, thus less interested in saving."

It’s not uncommon for college loan payments to be in the $500-$1,000 a month range, couple that with car payments and other expenses and it’s not hard to see where a too small pay check can make saving a challenge for all the but the most determined.

It’s not uncommon for college loan payments to be in the $500-$1,000 a month range, couple that with car payments and other expenses and it’s not hard to see where a too small pay check can make saving a challenge for all the but the most determined.

There’s no shortage of possibilities for the decline. "They observed the crash of 2008 and the financial devastation it took on their parents’ investment portfolios and real estate holdings thus the ‘why bother’ attitude," says Melody Juge, founder and director of Life Income Management.

But despite the obstacles and disappointments young people face, some aren’t willing to attend the Millennials’ pity party. "Research and the experience of debt counselors show that even most low and moderate income people can find something to save each month, even if it’s only loose change," says Brobeck. Small change eventually adds up.

Then too, there’s the thinking that saving is essentially a lifestyle choice, and many Millennials are choosing to just say no. "Maybe that lifestyle may not have been modeled for them growing up. Maybe dad and mom don’t save much and live hand-to-mouth. Maybe they never were encouraged to save as young as eight or nine years old," says Lori Atwood, a financial advisor and planner with Fearless Finance.

They also may have seen plenty of spending, maybe not even in their household, but everywhere they looked they were inundated with messages to buy, buy, buy, the latest, greatest of everything, to be the prettiest, sexiest, or the flashiest guy with the coolest car and so on and so on. Young folks are often the ones standing in line for the newest phones, sneakers, flat screen TVs and the like.

Part of the challenge too, is that retirement and growing old seems light years away and this generation functions in the now and here, quicker faster please.

What do the numbers portend?

The survey results are not to be lightly dismissed. "We need to do a better job of educating our children about the pros and cons of compound interest and how time is money," says Michael Keeler a certified financial planner with GFS & Associates. The sooner they start saving, even small amounts, the better.

The ramifications of not saving are huge. "The big problem is these people will never get ahead in life. They will always be digging themselves out of a hole that is getting deeper and deeper," says Keeler.

Even those who develop a savings habit later in life won’t necessarily make up for lost time. "Although they may increase savings rates dramatically in the future, the time lost may lead to lower overall retirement balances due to the missed compound growth over time," says Joshua Duvall, an insurance and social media specialist with Capital Financial Services.

How to chart a different course

What’s the solution for what ails the Millennials? "Financial institutions have fallen short of their responsibility to educate and provide financial guidance and tools that help account holders really understand their money and how they can improve. Institutions have to make managing money not only easier and more convenient, but a lot more enjoyable and exciting as well," says Ryan Caldwell, founder and CEO of MX, formerly MoneyDesktop.

Truth is though, with technology there are a plethora of tools for those who want to use them.

Stick to the basics. "Know where your money goes. Apps such as YNAB, Mint or your bank’s money tracking app can be a huge help," says Katie Brewer, a certified financial planner with YRL Planning.

Figure out where your money should be going. "I love the 50/30/20 rule. Fifty percent or less towards essential fixed costs, like housing, student loans, car payment, etc., 30% or less to variable spending like clothes, eating out, and 20% or more to savings or additional debt payment.

Make it easy on yourself. Automate savings. What you don’t see you don’t miss.

The Millennials only need look around to see what happens when you don’t save for retirement. If 80 is the new 65, for Millennials will 90 be the new 65?

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Comments
Anonymous
Anonymous   |     |   Comment #1
Millennials are simply smart.  Why on earth should they attempt to save money in the face of $18T debt left them by their elders, plus tens of trillions more in projected, unfunded, debt forecast for the upcoming core years of their lives.  How do you expect Millennials to deal with something so onerous and impossible!  They are living for the present as best they can.  Who can blame them.

There was a time in America, and it was not all that long ago, when parents sacrificed a great deal in hope their kids would have better lives than they did.  Spoiled baby boomers certainly turned that approach on its head.  The selfish boomers borrow and spend to make their own lives more pleasant, leaving the massive bills to be paid by future generations long after they are dead and gone.  Instead of caring about their kids' futures, boomers are leaving behind a legacy of debt millstones for future generations to shoulder ad infinitum.

You've heard of the "greatest generation"?  Boomers are the "me" generation.  Their calculated generational theft is the antithesis of great.
Anonymous
Anonymous   |     |   Comment #2
"Millennials" are whiney little crybabies that want the government to take care of them so they can go protest "evil capitaism" and our military.
Anonymous
Anonymous   |     |   Comment #3
They all cry.  I notice most have apple cell phones and can pay for the monthly plans.  They go to expensive schools and many get worthless degrees and have large student loan payments.  They are never told no and they are all special. 
Anonymous
Anonymous   |     |   Comment #5
But the democrats count on the millennials to pay the debt, didn't you hear Pelosi saying it: "We need more debt, that stimulates the economy, lift the debt ceiling and this nation will not have debt anymore or her statement, let everybody come to America we will give amnesty to all and dilute the national debt to many more people and the debt ratio will shrink..."
No, the millennials are stupid for voting the democrats in power, that is the conclusion I came to.
Anonymous
Anonymous   |     |   Comment #6
the "children" have been educated by the parents on how to save and find a good deal.  unfortunately, saving might not be "worth" it these days because: college costs a lot more than in the past, the job market isn't great (not just the unemployment situation, but in a way, due to globalization, people who've come from places working for peanuts, are wiling to come to the US for...better peanuts.  So, competition is fiercer...add in the fact that savings vehicles are not there anymore....the value of a dollar is going downhill (low interest rates, savings accounts are lousy...yet the stock market is too **** volatile for a newbie to enter)  the prevailing motto these days (courtesy of the workplace) is "use it or lose it" (be it vacation time or time in general) and that retirement might just be a pipe dream...  as a result, with that mentality...i understand why millenials don't save.  I just don't agree with the thinking.  
henry
henry (anonymous)   |     |   Comment #10
who cares if its volatile? you can make a crap-ton more with stocks than with cash
Anonymous
Anonymous   |     |   Comment #7
Today's young are spoiled brats, they have everything they need without much effort on their side, why work if you can attach yourself as a parazite to your parents or uncle Sam and leech as much as you want. They need to be thought a lesson in responsibilities, otherwise they will never be responsible people.
Anonymous
Anonymous   |     |   Comment #8
Another silly survey. Most people in that age group have no fear of dying or reason to aggressively save. We have a consumer-based society yet some complain about consumers. If everyone saved aggressively, those rates you want to see at 5% would be at .25% forever.

In my dentist's office I see young and middle-aged people acting as consummate professionals. They have futures and smiles on their faces. I find this interesting because dental insurance only covers so much and their business is booming...boomers like us spending savings to rebuild/restore aging pearly whites. I wasn't a saver in my 20's and 30's; I was a learner and earner. I then spent 20 years (40-60) earning, supporting and investing. I don't need social security but I gladly take it, pay the taxes and pass it on to charities of MY CHOICE. Every generation has to relearn old lessons and this one will too. We're becoming a nation of narcissists and it's kind of ugly.         
Anonymous
Anonymous   |     |   Comment #9
No Smoke, No Mirrors: The Dutch Pension Plan

The Dutch system rests on the idea that each generation should pay its own costs — and that the costs must be measured accurately if that is to happen. The Dutch approach bears little resemblance to the American practice of shielding the current generation of workers, retirees and taxpayers while pushing costs and risks into the future, where they can metastasize unseen.

http://www.nytimes.com/2014/10/12/business/no-smoke-no-mirrors-the-dutch-pension-plan.html?src=me&_r...
Anonymous
Anonymous   |     |   Comment #11
They are a generation, that has only known american financial markets, that are radically manipulated by the fed. Their attitude toward money acknowledge the socialist distribution of the money supply. It would be interesting to compare their attitude toward saving, to those in socialist european countries. Very soon they will start wearing berets and smoking non filtered cigarettes.