No more lecturing younger workers about fiscal responsibility – Millennials are actually pretty good at saving money.
A new study from the personal finance website Bankrate.com found that 62 percent of Millennials are saving more than five percent of their income. Only half of older adults, aged 30 and up, are saving at the same rate.
The numbers are based on telephone interviews with a nationally representative sample of 1,000 adults conducted in March 2016.
Although Millennials might be starting early, they’re not starting big. Just a little over a quarter are saving more than 10 percent of their incomes, while 32 percent of people aged 30 to 49 are saving more than 10 percent.
Greg McBride, Bankrate.com’s chief financial analyst, attributes Millennial’s inclination towards saving to growing up during the financial crisis. “Because the financial crisis occurred during financial formative years, they don’t have the same consumption mentality as their predecessors,” McBride says.
Older generations saw “plenty of boom times where the stock market was going up, home prices were going up, so they didn’t feel they had to save,” McBride says. “What resonates with Millennials is that markets can go down too.”
The ideal savings rate is 15 percent of one’s income, according to McBride. Even though that might seem like an impossible feat for many people, McBride advises getting up to 10 percent as soon as possible and then working up to 15 percent.
About 16 percent of workers are saving more than 15 percent of their income, an increase from 14 percent last year. Although still nowhere near what it should be, the numbers are headed in the right direction.
Even though McBride found the overall report encouraging, one disheartening finding was that more than one fifth of Americans aren’t saving anything. “People recognize how important savings is and that it’s a much higher priority, but the problem for a lot of people is that income hasn’t gone up,” McBride says.
People in higher income brackets generally tend to save more, but the report found that high income isn’t a prerequisite for saving. A greater number of Americans who make between $30,000 and $50,000 save more than 10 percent of their income than those who make between $50,000 and $75,000.
“There’s a recognition that nobody is going to do that saving for them.” McBride says. “They’re rolling up their sleeves and doing it for themselves.”
In other good news for savings, the Commerce Department reported on Monday that the personal-saving rate jumped to 5.4 percent in February, up from 5.3 percent a month prior. The rate is now at its highest level since the end of 2012.
McBride advises to keep in mind that this statistic is an aggregate figure and that it doesn’t necessarily translate to the household level. What’s important about it is the direction it’s going in.