Millennials Having a Hard Time Saving Money

In the aftermath of the Great Recession, Americans — feeling on edge and overly cautious, coupled with an inability to take out loans to buy houses and cars due to tightened lending practices by bailed out banks — began to save. Moody’s, which provides economic related data and research shows that more Americans began saving as a whole since the financial crisis, but if you break down the savings data into demographics, you’ll find stark differences in who’s actually doing the saving:

• Americans 55 and older have a savings rate of 13 percent
• Those ages 45 to 54 have a savings rate of 6 percent
• Gen X-ers ages 35 to 44 have a savings rate of 3 percent
• Millennials. Those under 35 have a savings rate of negative 2 percent.

Negative 2 percent!

Yes, according to Moody’s and The Wall Street Journal, young Americans as a whole are burning through their earnings and going deeper into debt.

Thankfully, the WSJ avoids the kind of hackneyed discussion of millennials that paints them as ill-informed, entitled and reckless. Instead, it points out that stagnant wages and rising debt loads have had a significant effect on why they’re not saving: Gen X “earned wages that were 9% higher than today after adjusting for inflation”; Gen X also had median student debt of $6,100 in the mid-’90s compared to $17,200 for young people today.

There have been increases in other kinds of fixed costs: the rate of health care costs, for example, continues to increase well above the general rate of inflation. (For more on increases in fixed costs and the “over-consumption myth,” see Elizabeth Warren’s Yale study.)

In sum, the under 35 crowd have fewer dollars to sock away after the bills are paid.

So, what are we to do? Moody’s and the WSJ provide a problem and no clear answers. Some of us shrug and hope things turn around. Some turn to Dave, or Suze, or the community we have here, where the advice is discussed on an on-going basis, or found in the archives.

We share our stories, and we learn from each other, and then we take the pieces of what we’ve learned to create our own rules to live by, to figure out what matters and what will work in our individual lives.

Here is something: Throughout the majority of my twenties, I saved very little money. It’s true. At 24, a newspaper reporter could have pulled me aside and turned me into a trend story: Here is a young person, saddled with student debt, earning $30K with scant benefits, living in one of the most expensive cities in America. Are you saving for your future self, young person? What a shame, what a shame.

I was not ashamed about my inability to save back then. After my bills were paid, the few dollars I had leftover from my paycheck were sent home to my parents. And if I had any dollars left after that, which was not often, I spent it at the bar, or at dinner, rather than shove it in a savings account, because I was 24 and didn’t want to squander my youth by squirreling away tens of dollars and becoming a shut-in who never spent a dollar on himself. I made my rules to live by: the bills came first, then my parents, then the present me — my future me (my savings) could wait. Things worked out: I worked hard; I was ambitious; I found better jobs and earned more money, shoved money into retirement and savings accounts, and here we are.

I struggled to save money when I was younger, and had to work at it for a few years to get to a place where saving was feasible and automated. But I had a plan for advancement in my profession, and faith in my abilities.

If this imaginary reporter followed up on my story years later in my thirties, she would find that I figured a lot of stuff out (if only reporters followed up on all their sources they used in their trend stories) — figuring it out just took some time.

You have some time.

That’s my story, in brief. What’s yours?

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