While they may have a bad reputation for saving money, Millennials are actually saving much more than Baby Boomers when it comes to retirement.
In fact, as a generation, Millennials are set to become richer in their retirement than Gen X-ers and Baby Boomers as a whole.
This data comes from a new study from NerdWallet, which looked in-depth at how Millennials are spending their money. Known primarily as the age group between 18 and 34, Millennials were found to save a higher percentage of their income compared to their elders. All in all, Millennials are setting aside an average of 10% of their income to retirement savings.
Comparatively, Gen X-ers, the demographic aged 35 to 54, are only saving 8% of their money for retirement. Baby Boomers, aged 55 years and older, are only putting away 5%.
So even though a previous NerdWallet survey showed that a full 56% of Millennial women are not saving for retirement, there are others in the demographic that are showing promise for their financial future. And while the 10% metric may seem small, over one-third of Millennials are saving at least 15% of their annual income in preparing for retirement.
For their survey, NerdWallet polled more than 2,000 American adults — 1,112 parents and 874 non-parents. Even with the additional expenses of a child, 84% Millennial parents were putting money away, compared to 69% of non-parents.
Considering that the average age of retirement is 63, NerdWallet analysts explained to Business Insider that even though it may be years away, the key to saving for retirement is to invest early and consistently. They also pinpoint the fact that Millennials tend to make better decisions whenever they have the opportunity to save, instead of saving chunks of money whenever it is convenient for them.
“Millennials are making really good decisions whenever they have an opportunity to save more,” Arielle O’Shea, retirement and investing specialist at NerdWallet, explained to Business Insider. “Not just when they have a higher paying job, but they’re saving more after paying off debt and after getting married — those things are really notable.”
So how can people adopt these Millennial money-saving trends? O’Shea says it is easy and can be completed in three easy steps. One, save more after getting a raise or a substantial bonus. Two, cut back on dining and extra frivolous expenses as they add up after a while. And three, understanding exactly what you need to save is crucial.
Knowing how much you need to be saving compared to your annual income is the key to success. To do this, take your desired annual retirement income, divide it by 4% — which is the average amount you will be spending on living expenses during retirement — and you will have reached the magic number.
Readers, have you seen this trend from your own personal experience? Millennials, how much are you saving?