If you’re a millennial than you’ve already been through the mill of age-oriented stereotypes. They would say we are all compulsive hipsters that are self important and terrible at saving. While this may actually be true for some among us, statistical data would say otherwise.
According to a study done by T. Rowe Price, millennials are following better financial habits than that of the Baby Boomers at their age. The average that a millennial will save in their paycheck for retirement is 8%, and on average more millennials keep to a budget than that of our parents at 75% vs. 64%.
There are many contributing factors to why millennials in the past could not save. The high unemployment rate and bad economy in ‘07-’09 made it so that many college graduates had to consolidate and defer student loans until they found employment that could pay a high monthly rate. According to Bloomberg Business, education-related loans equaled to $1.16 trillion at the end of last year. This is a staggering 71% increase from the second quarter of 2009. This incredible debt, combined with a larger portion of the workforce freelancing or filling contract roles means that instead of putting more into a retirement plan, millennials are paying high monthly student loans.
That’s not to say they aren’t trying though. Millennials also have an understanding that retirement will likely fall on their shoulders. For this reason, more 20 and 30 somethings are looking into algorithmic based investment advisors. The ability for millennials to integrate new technology into their savings plans increases the efficiency in which they save. Additionally many millennials can track their money online, which is directly connected to a mobile device, making it much more accurate than keeping a paper checkbook.
An example of new technology is Wealthfront, a fully automated investment service that boasts $2.5 billion dollars in client assets. Not surprisingly, 65% of Wealthfront’s clients are millennials. Wealthfront’s new approach of integrating financial services at the tip of your fingers, whether it be phone, tablet, or laptop, allows millennials to have full control over their own financial well-being while at the same time utilizing their advanced algorithms for safe investments.
While better technology aides us in at least following where our money is going, the direction points that financial instability also exists in the millennial world. According to a TransAmerica survey, 20% of millennials have already withdrawn money early for their retirement plans. However in the same survey, 78% of millennials also stated that they think they are recovering from the Great Recession. This shows a timeline that correlates directly with the decline of the world economy in 2008.
Millennials aren’t dumb, and they aren’t shortsighted. Like many politicians before them, millennials were born into a terrible situation and had to dig themselves out of it. Financial irresponsibility and victimization was our parents doing, but the largest financial burden was put on the next generation, the millennials. For this reason, many millennials understand what it is to be poor, and for that reason will do everything in their power to stay away from it.
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