The cohort of Americans born between the years 1981 and 1997 have been called a lot of names: Millennials. Generation Y. The Laziest Generation. Even the satirical (yet equally annoying) ”Snake People“ was en vogue for a hot second. But according to a new survey from investment outfit T. Rowe Price, a more appropriate term might actually be “the Money-Conscious Generation.”
Mud-slinging old-folk might want to take note: The 18- to 34-year-old set is not only better about tracking their spending and sticking to a budget than Baby Boomers, but more of them have increased their 401(k) contributions in the past year, too. This is according to a new study from T. Rowe Price that analyzed the spending and savings habits of more than 3,000 working adults over the age of 18. Specifically, 75% of this group (who, for simplicity’s sake, we’ll call Millennials) told T. Rowe that they track their expenses carefully, as compared to 64% of Baby Boomers. Sixty-seven percent of Millennials stick to a budget, compared to 55% of Boomers. And 40% of Millennials have increased their 401(k) contributions in the past twelve months, nearly double the 21% of Boomers who did the same. (Though, to be fair, hopefully the retirement-nearing Boomers are already saving at high rates.)
“When [Millennials] have the means to do the right thing, it appears that they often do,” Anne Coveney, a senior manager at T. Rowe Price, said in a statement accompanying the survey results. “ They are exhibiting financial discipline in managing their spending and are defying stereotypes that this generation is prone to spend-thrift, short-sighted thinking,” she added.
The study also found that Millennials are saving an average of 8% of their annual salary towards retirement and Boomers are saving 9% — both of which are lower rates than the 15% savings rates that T. Rowe Price financial planners recommend.
Other findings from the T. Rowe study help to enforce the idea of the financially conscious Millennial: 88% of Gen Y respondents said they are pretty good at living within their means, and 67% told T. Rowe they save “by any means necessary.” Seventy-four percent said they are more comfortable saving and investing money rather than spending it, and of Millennials who were auto-enrolled in their 401(k) plan, an equally large majority (79%) said they were satisfied that they were automatically swept in.
That Millennials prioritize saving over spending is not entirely surprising: many were financially scarred by the Great Recession, especially after graduating into an environment with a 16%-plus unemployment rate and stagnant wage growth. Over the past several years, Millennials have drawn comparisons to the post-Depression generation (also known as the “Silent Generation,” a term that, if anything, proves there really isn’t any good name out there for any generation) for their aversion to the stock market and insistence on holding on to cash.
“They have a Depression-era mindset largely because they experienced market volatility and job security issues very early in their careers, or watched their parents experience them, and it has had a significant impact on their attitudes and behaviors,” Emily Pachuta, head of investor insights at UBS , said in an interview last year.
Now of course, members of one enormous generation are not all alike, and the T. Rowe Price saving and spending study did find that not every Millennial is saving with vigor and enthusiasm: 32% of Gen Y respondents who were auto-enrolled in their company’s 401(k) at a 1% rate said they would opt out if auto-enrolled at 2%, and 38% who were auto-enrolled at 2% said they would opt out at 3%. They are also, T. Rowe found, more likely than Boomers to seek the help of family and friends if they were faced with a financial emergency (55% compared to 17%, respectively) and more likely to resort to credit cards in a financial emergency (57% compared to 43%, respectively).
Via: Maggie McGrath at Forbes