“There is a greater inclination toward saving among millennials than we’ve seen in previous generations,” says Greg McBride, chief financial analyst for Bankrate.com.
Sixty-two percent of millennials, defined in the survey as consumers between the ages of 18 and 29, are saving more than 5 percent of their pay for retirement, emergencies or for other financial goals, the study found. That’s up substantially from the 42 percent who were saving at least that much last year.
It’s also greater than the roughly 50 percent of consumers between the ages of 30 and 49 who were saving as much.
A look at last year’s survey helps to illustrate the shift. The portion of millennials saving the bare minimum, less than 5 percent of their pay, fell to 19 percent this year from 37 percent last year. And the share of people saving more, between 6 percent and 10 percent of their pay, increased to 33 percent this year from 20 percent in 2015.
So how is it that some millennials are able to save so much more now? Some workers may be stashing away more money as they move up in their careers and earn higher wages, says Karen Carr, a financial planner with the Society of Grownups, a financial company that targets millennials. For instance, some people may have moved from part-time jobs to full-time positions. Others may have upped their savings rate after landing a promotion or raise.
The unemployment rate for people between 20 and 24 years old fell to 8.6 percent in February from 9.9 percent a year before, according to the Bureau of Labor Statistics. Wages and salaries are also higher for people of all ages, by 4 percent in February from a year earlier, according to the Bureau of Economic Analysis.
Having cash on hand for emergencies could also be a huge motivator for young people who may have struggled to land a job during the recession or who saw family members get laid off, says McBride of Bankrate. “Even if they weren’t directly impacted, they saw the effect on their parents or their grandparents,” he said.
That could explain why when asked about the motivation behind their saving, the highest share of millennials — 40 percent — said they were setting aside money for an emergency, according to a separate report from the American Institute of CPAs and the Ad Council.
The next biggest motivators were to save for a big purchase, which could be more common for millennials who are growing up and making major life changes, such as starting a family or buying a home. Thirty-six percent of 20-something and 30-something consumers said they were saving for a vacation, 27 percent reported saving for a house and 26 percent are setting aside money to buy a car, according to the Aicpa report.
Whatever their motivation, saving turned out to be more important to millennials than some of the other goals that may be more stereotypically expected of them, according to that survey. Saving more was the No. 1 goal named by 34 percent of millennials, higher than the 20 percent of people who said living a healthy lifestyle was their top goal. It was also greater than the 19 percent who said their No. 1 priority is to pay down debt.