Despite saving well, millennials have less wealth than their parents did at their age
According to Bank of America’s latest Better Money Habits report, millennials have been quicker to start saving for retirement compared to previous generations. The study found that on average, millennials began saving for retirement at the age of 24, while Gen X started at 30 and baby boomers at 33.
For the study, Bank of America surveyed 1,903 Americans aged 18 to 73. The millennial respondents were defined as those between the ages of 24 and 41.
The survey results are quite impressive, with nearly three-quarters of millennial respondents (73%) reporting that they’re saving money. Of those saving, 48% are setting aside money monthly. Among those who are saving, 75% are doing so for retirement, over half (51%) are building an emergency fund, and 32% are saving for a home.
According to the survey, a good number of millennials have significant savings. Around a quarter of respondents have saved $100,000 or more, and 59% have saved at least $15,000. While these numbers paint a picture of a solid foundation for wealth building, there’s a significant issue: millennials still have less wealth than their parents had at the same age.
Millennials Are Financially Behind Their Parents
A number of studies have highlighted how far behind millennials are when it comes to accumulating wealth.
One study by Deloitte found that the average net worth of a millennial is under $8,000. The same study also revealed that Americans between the ages of 18 and 35 have seen a 34% decline in net worth since 1996. A paper from The Brookings Institution showed that median household wealth for those aged 20 to 35 was about 25% lower in 2016 compared to 2007 for the same age group.
This illustrates the impact of economic challenges: millennials are dealing with massive student loan debt, and the rising cost of living is outpacing wages. In fact, millennials earn 20% less than baby boomers did at the same age, according to a report by think tank New America.
Much of this can be attributed to the aftermath of the Great Recession. Older millennials who graduated into the financial crisis were forced to face a tough job market and wage stagnation, making it hard to save. But the experience of witnessing the recession up close has made younger millennials more cautious about the economy.
This has resulted in millennials adopting more practical money habits, such as saving for emergencies and contributing to retirement funds, as generational expert Jason Dorsey explained to Business Insider.
It’s a bit of a paradox: The economic aftermath of the recession has driven millennials to develop good savings habits, but it’s also made it difficult for them to build significant wealth from those savings.
Article inspired from Better Money Habits report - https://about.bankofamerica.com/assets/pdf/2020-bmh-millennial-report.pdf
