Nearly half of millennials don’t have money in their savings accounts, a recent survey reported, leaving them unprepared for emergency expenses and retirement.
Millennials are the generation with the least amount of savings, according to GOBankingRates (GBR) — an online personal finance resource — which has surveyed adults age 18+ over the past two years to find out how much money they’ve saved.
A savings account usually holds deposited money for the owner, which they can immediately access, according to Dr. Robert Kolb, a finance professor at Loyola.
In 2017, GBR found 46 percent of young millennials — who GBR defines as adults ages 18 to 24 — had $0 in their savings accounts. In 2016, only 31 percent of millennials had no savings, according to GBR’s survey, meaning young adults are getting worse at saving their money.
Last year, GBR found 21 percent of those surveyed had $1,000 or less in their accounts. In 2016, the number of people with $1,000 or less was 41 percent, the survey reported.
Because the other three categories had little to no change from 2016 to 2017, the data implies more people in 2017 had less in their savings accounts than in the previous year.
While college-aged millennials came in last, older millennials — who GBR defines as adults ages 25 to 34 — aren’t doing much better. In 2017, 41 percent of older millennials didn’t have money in their savings accounts, which is a jump from the 33 percent in 2016, according to the survey.
Millennials have experienced the benefits of a 67 percent increase in wages since 1970, but costs of living such as rent, house prices and college tuition have increased at a faster rate than income, giving millennials a heavier financial burden than previous generations, according to Business Insider.
Kolb said he thinks people should ideally start getting into saving habits at a young age with the help of their parents.
“It’s good if you’ve been exposed to the importance of savings before [getting your first job],” Kolb said. “It’s something parents can do for children to help them get those habits and understand the importance early.”
Brian Sabath, a 20-year-old political science major, said he’s had a savings account for about two years, and has saved more than $1,000 by putting 50 percent of every paycheck into his savings.
Sabath said he was interested in having an emergency fund and his father influenced him to start an account.
“My dad has always been a very financially savvy person, so because of that, I knew I wanted to save money, or always have some money laid aside,” the sophomore said. “There’s things you’re always going to have to buy no matter what.”
Kolb said he thinks one factor that might drive millennials away from saving at a young age is the shift in lifestyles between generations.
“I’ve been very struck by the difference in the way millennials live compared to the way I lived when I was that age,” Kolb said. “[They spend] exorbitant amounts [of money] on things that I never could have afforded at that age, and just seem kind of frivolous. I suspect that it’s a reflection of the fact that they’re spending everything they get their hands on rather than saving anything.”
Sabath said he also sees people his age spending their paychecks rather than putting any of their money aside.
“I noticed that all of my friends spent their paychecks like they were gift cards, and never really saved any money, and then when it came to buying actually important things, they had like $5 in their bank account,” Sabath said.
Kolb said he believes it’s “critically important” for people to start saving for retirement early.
“Retirement these days lasts longer and longer with people’s longer life expectancies,” Kolb said. “Also, things happen with people’s employment, often people’s employment ends before they’re ready for it to end.”
From 1950-2010, average life expectancy has extended about one year per decade, according to retirement researcher Wade Pfau. Today, about 25 percent of 65-year-olds will live past 90 years old, and about 10 percent will live past 95 years old, according to the Social Security Administration.
Alice Gordon, a sophomore studying political science and history, said she doesn’t have any money in a savings account. She said she spends her money on paying off two of her student loans and going out with her friends.
“I just think a lot of millennials are not in the position to be [saving for retirement early],” the 19-year-old said. “It is very important to make sure you have some sort of financial stability in the future, but … it’s just not a reality for a lot of people.”
Gordon also said she thinks people her age have a “live now, worry about it later” attitude surrounding saving for the future.
“There is definitely a kind of ‘Just do whatever you want now, and figure it out later’ idea that our generation has,” Gordon said.
Kolb said a savings account with money is the better choice over just having a credit card to use for emergency expenses.
“Say you’re out of a job for six months, it’s going to be just about impossible to put all that on a credit card,” Kolb said. “The second thing is, the interest rates on credit cards are so ruinously high that it makes it very difficult to pay off credit card debt because it just keeps growing.”
Kolb said the importance of a savings account is to build up resources for the future, for situations when people need a little extra money.
“It’s a fund for emergencies,” Kolb said. “If you lose a job. Have an accident. Or [if] something happens to your car that’s not fully covered or you suddenly get fired, you’re gonna need money to live on until you replace your income.”