The younger generation is notoriously famous when it comes to managing, or should we say, not managing their finances. However, if a new survey is to be believed, then millennials’ money habits are improving and they are more judicious as to their retirement than those of earlier generations and have already saved a significant amount.
Millennials’ money habits
According to a report from Bank of America, about a quarter of millennials – Americans between the ages of 24 and 41 – already have more than $100,000 in savings, an increase of 16% from 2018. The report surveyed 1,903 respondents.
Before we go on further, it is important to note that this $100,000 isn’t lying around in a savings account. Rather, this amount includes 401(k) funds and funds in individual retirement accounts. Also, the $100,000 figure is not a net worth figure, so it does not include things like home value.
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According to Bank of America, about three-quarter of millennials are saving now, an increase of about 10% in two years. Moreover, the report says more millennials are saving despite facing high debt.
“Today’s millennials are more serious about their finances than we’ve seen historically,” said Bank of America’s global head of environmental, social and governance, Andrew Plepler. “They have more financial acumen than people suspect.”
The survey titled Better Money Habits Millennial Report notes that millennials on average are starting to save for retirement from the age of 24. In comparison, Generation Xers started saving at 30, while baby boomers at 33.
Further talking about millennials’ money habits, the survey found that more than half of millennials check their account balances regularly and keep track of their expenses. Also, about 40% have improved their credit score in the past year and 46% pay their credit card balances in full every month.
How do millennials plan to spend it?
Talking of how millennials plan to spend their savings, the report notes that retirement is the top priority for 75% of millennials.
“Millennials have seen their parents and the culture around them go through the financial crisis. They are more conscious of how important it is to be prepared,” Plepler said.
Further, the report notes that 42% of millennials are setting the money aside for traveling, while for 32%, the main goal is to buy a home. Buying a home is a top priority for younger millennials as well. For instance, 40% of younger millennials (age 24 to 30) and 41% of Gen Z (under 24) say they are saving to buy a home.
“I think the home is still an anchor asset guiding goal-setting for this population,” said Plepler. “They see it as a part of their stability in life and also wealth building.”
Some in debt as well
Though millennials’ money habits are certainly improving, some are not saving at all. As per the report, 27% of millennials have no savings. Moreover, three-quarters of millennials are in debt, including 16% with over $50,000 in debt (excluding home loans). Talking of the type of debt, 40% carry auto loans, 37% credit card debt, 36% mortgages, 25% student loans, 12% personal loans and 11% medical debt.
High debt is preventing millennials from meeting their financial objectives. As per the report, over three-quarters of millennials who owe debt, say that the debt does not allow them to meet their personal and financial goals. Due to the debt, 42% say they are not able to buy a home, while 21% are delaying their marriage plans and 21% their baby plans. Also, 18% say that debt is keeping them from living on their own without any help from family and friends.
Despite the savings, one-third of the millennials feel their peers are ahead of them financially. Also, about one-third worry about finances now compared to a quarter in 2018.
Further, the report says that about 82% of the millennials would settle for a smaller home, while about half would go for a less desirable job with a higher salary than a job of their choice with less pay.
Plepler, however, notes that anxiety about finances may not be a bad thing for the millennials. “It keeps them from being complacent,” he said. Further, he said that millennials have seen the financial crisis, and after, how home prices and the stock market can go up along with it, but they are also aware that “it can go down” as well.