Below is a complimentary Demography Unplugged research note written on 12/11/20 by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.
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According to a new report, most Millennials are saving for retirement (73%) and building emergency funds (51%). In general, young people’s financial preferences show that they’re more focused on saving for tomorrow than living for today. (Bank of America) |
NH: When it comes to money, most Millennials are playing it safe. According to this BoA report, nearly three-quarters (73%) of 24- to 41-year-olds are saving, up from 63% two years ago. More than half (51%) have more than $15k in savings, and 24% have more than $100k.
The savers outnumber those who have no savings at all (27%) by a three-to-one ratio.
When asked to choose between two options, 82% of Millennials said they’d rather buy a smaller, more affordable home than a larger home at the top of their budget. 73% would rather live a minimalist, frugal lifestyle than a maximalist one.
68% would prefer to “pay off debt quickly and make sacrifices along the way,” compared to 26% who would rather “pay [it] off slowly but live the life I want.” 57% would rather stay in a less desirable job with a higher salary than one they like more but pays less.
The report also offers some comparisons showing that Millennials are more frugal than older generations were at the same age. On average, Millennials began saving for retirement at age 24, Gen Xers at 30, and Boomers at 33. In addition, fully 58% of Millennials said that finances were an “important consideration” when they started a family, compared to 49% of Xers and 46% of Boomers.
We’ve often written about the Millennials' singular fixation on long time horizons and the need to save. (See "Millennials Embrace the Thrift Ethic" and "Once Again, a Nation of Savers.")
Yet despite all their attention to scrimping and saving, most Millennials (75%) aren’t confident about their financial situation. Of those who say they have discretionary income each month, 47% feel guilty about spending it. The majority (51%) say their financial situation is behind where they think it should be--including 39% of those with six-figure household incomes.
Significant shares of young people also believe their peers are making more money (43%) and are further ahead in their careers (43%) than they are. This makes them pretty realistic about how they're doing--only a bit more than half think doing they're about the same or better than others.
However, they’re less likely to worry that they’re behind their peers in saving money (35%), which suggests that Millennials feel more confident about their behavior (something they can control) than about the outcome (something they can't).
Bottomline: Millennials obsess a lot on the need to save. Yet they’re still struggling with a mismatch between social expectations and their own personal reality (see “Millennials’ Mental Health Struggles Go Beyond Finances”). Far more than older generations, Millennials feel ashamed to talk to anybody about how their doing economically (see "Don't Bring Up Personal Finances with Millennials").
Most of all, they sense that no matter how much they stash away, financial security still eludes them.
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ABOUT NEIL HOWE
Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.
A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.
Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."
Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.
Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.
Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.
