Millennials, or America’s youth born between 1982 and 2000, now number more than 80 million and represent more than one quarter of the nation’s population, according to the Census Bureau, outnumbering both baby boomers and Gen X.
When you consider that millennials have had to come of age during a terrible recession, a bad job market, and are burdened with unprecedented amounts of student loan debt, it’s easy to understand that they developed different financial habits than other generations.
In fact, a study by Bankrate.com, finds that 62% surveyed millennials are saving more than 5% of their incomes — up from 42% last year, while just 50% of older adults (age 30 and up) are saving more than 5% of their pay. Perhaps we should all follow their lead.
The ‘go to school,’ ‘work hard,’ ‘save for retirement’ model that worked for Baby Boomers and Generation X simply doesn’t add up for Millennials. Their financial attitudes are much more like those of people who grew up during The Great Depression.
“These days, many Millennials are deliberately ‘traveling light’ financially–by choosing not to own a car or by delaying buying their own home, for example,†says Carla Dearing, CEO of SUM180, an online financial planning service created by women for women.
“If you are one of these Millennials, remember that you still need to cover the basics: building a cash cushion, paying down debt, and saving for retirement,†she adds.
Dearing offers these tips:
- Get a handle on your expenses. When you know where your money goes, you are in control and can be thoughtful about aligning spending with priorities. Use an online money tracking service, like Mint or Quicken, to see all your financial accounts in one place and even create your first budget. Tracking your expenses may also help prompt you to address some important loose ends if you’re newly on your own, such as: a) Is it time to transfer your cell phone number to your own bill? b) If you have started a new job, when does your health insurance coverage start, and what will it cost you?
- Save six times your monthly expenses as a cushion for emergencies. Now that you know how much you spend every month, multiply that amount by six. This is the amount you need to set aside in a readily accessible savings account in case unexpected expenses come up, like repairing your car after a fender bender or surgery for your dog. Be disciplined about saving a little every month until your emergency fund is where it needs to be, even if it means sacrificing little luxuries once in a while.
- Bite the bullet and start maxing out your 401(k) and saving in an IRA. Too many Millennials delay saving for retirement because they don’t know which accounts they need, which funds to buy and how much to contribute. Don’t overthink it. Get help. Your benefits administrator and reputable fund companies like Vanguard and Fidelity can answer those very questions.