Most millennials have a general understanding that they should be saving money. Still, when thinking about questions like “how much will a millennial need to retire”, many are at a loss trying to come up with a figure.
Well, although providing a specific answer is almost impossible without knowing the specific situation, the truth is that in today’s economic climate, millennials need to be saving as much as possible.
But how much money do most millennials have in their savings? And what about the ever-present question of how to save money as a millennial?
Let’s explore the average savings of millennials and how to make sure you have enough when you retire below.
How Much Does the Average Millennial Have Saved?
Today’s millennials face several challenges that are making it more difficult to accumulate savings and secure themselves financially.
According to a SmartAsset study, millennials aged 16 to 34 make around $35,000 on average, which is 20% lower than baby boomers made at the same age when adjusted for inflation.
But just how much of that is going to savings?
Well, according to a recent survey, 58% of millennials have less than $5,000 in their savings account, with just 70% having a savings account at all.
In fact, according to a survey by Morning Consult, 36% of millennials don’t save for retirement at all, with 31% setting away just 1-10% of their income each month.
More than half of the millennials surveyed also said that they have outstanding credit card debt. This makes trying to save for retirement that much more difficult and helps explain the low millennial savings rate.
How Much Should Millennials Be Saving Now to Prepare for Retirement?
Now that we’ve gone through the average millennial savings, we need to look at how much do millennials need to retire and how much should millennials save for retirement each month.
Well, although, as mentioned before, this depends on your situation, there are certain recommendations that seem to be a good indicator of what you should aim for.
A good rule of thumb to follow is to try and save at least 25% of your income each month, as that will provide you with the cushion you need to achieve significant monetary gains in later stages of life.
Now, 25% may seem like an impossible amount, especially for those that are already struggling with day-to-day expenses or with paying off their debt.
But the truth is, every additional percent you can save will significantly reduce the time you’ll have to work, which can allow you to retire earlier.
However, in the end, you will have to decide on your own how much you are able to set aside each month, and even if 25% seems impossible, starting with smaller amounts at first can help you develop positive habits and produce good results.
Factors to Consider That Affect Saving Money as a Millennial
In this article, we went through a range of factors that influence how much money most millennials have in their savings, which include the stagnating growth of wages and credit card debt.
But there are many other reasons why a significant part of millennials struggle with their savings, some of which are easier to address than it may seem.
For one thing, today’s consumer habits influence the purchasing decisions that we make, and items that might be considered a luxury become an absolute necessity simply because they are such an integral part of self-identify for younger people.
What’s more, the whole idea of saving money doesn’t seem appealing and is viewed as a sacrifice, although in truth, that money doesn’t disappear or get wasted, but instead remains securely invested and growing.
So, the vital thing to understand when approaching savings is to look at it as an investment into yourself that will provide you with security, peace of mind, and a better future.
Sometimes, a simple change in the frame of mind is enough to help make the process of saving money that much easier.
Tips for How to Save Money as a Millennial
By now, you should have a pretty solid understanding of how much millennials save, so let’s look at some of the most useful tips that you can use to make sure that you succeed in reaching your savings goals.
1. Start Small
One of the biggest mistakes that millennials make when trying to save money is being too ambitious too quickly.
We already mentioned the 25% mark as a good amount to aim for (at least initially), but that doesn’t mean that you have to start setting aside that much from day one, especially if you already have some struggles with your finances.
Instead, make the initial goal doable and easy to accomplish – even if you set aside just $5 per day, that’s almost $2,000 per year that you can invest and grow.
2. Cut Unnecessary Expenses
At the beginning of trying to save money, it can look like you just don’t have any means of finding the extra money to set aside, but that is usually a matter of perspective.
If you do a thorough analysis of your monthly expenses, you are sure to find plenty of things you spend money on that are unimportant or even outright wasteful.
3. Focus on Your Career
While cutting back on expenses is a viable strategy, a much more pleasant approach to saving more money is to simply make more each month.
Therefore, it makes sense to focus on your career and grow your income, investing the additional money that you make, such as bonuses, into your future.
Bone Fide Wealth
Developing productive habits for saving money can be a challenge, especially if you don’t know where to get started or even where to invest.
Luckily, you don’t have to figure everything out on your own. At Bone Fide Wealth, we are millennial investing experts that help our clients find the best plan for their needs that accommodates their financial situation and future goals. Call us at 212-390-1161 or fill out our contact form to learn more!