A recent survey by GoBankingRates discovered that most young millennials had almost nothing in terms of savings. As part of their study, they asked over 8,000 people living in the United States about their saving patterns. Having compiled similar surveys for a number of years, they discovered that Americans, as a whole, were saving less. However, one distinct demographic has little or nothing saved in their account.
Millennials, for the purpose of the survey, are people who are aged between 18 and 34. The investigation discovered that 46% in 2017 of millennials have zero savings. That was up from 31% in 2016. This is a worrying trend as an increasing number of millennials are putting them at financial risk. In comparison, only 13% of millennials have $10,000 in savings.
The Gig Economy
Access to savings is essential for people of any age. Millennials, in particular, often find themselves in predicaments that require backup funds. Many young people who are just emerging from third-level education find it difficult to secure permanent employment. Often these young people work in what is referred to as the “gig economy”. The number of Americans who work in the gig economy is at the highest level in 30 years. Due to the uncertain nature of the gig economy, young people can fall in and out of employment on a regular basis. The time when a young person could emerge from a third-level institution, or even with a high school diploma, and secure permanent employment has finished. Instead, it has been replaced with a gig economy, where work can be fleeting and temperamental.
Due to such working conditions, millennials need access to support funding. Unless they can rely on financial support from their families, this has to come from their own personal savings. While work is can be fleeting, bills such as rent and utilities must be met every month. Therefore, millennials require saving funds to bring them through rough financial patches.
Nonetheless, a growing number of millennials are not saving money. However, this may be symptomatic of wider economic problems. According to a study by the University of New Hampshire, 25% of workers in the gig economy live in poverty. The Pew Research Center would support such findings. They have discovered that millennial headed households experience greater poverty than households headed by any other generation. A lack of economic security has led to millennials earning less than their age group were earning, 40 years ago. In 1980, the millennial age group could expect to earn $35,000 per annum. By 201 this had fallen to just $33,000.
Millennials, therefore, are caught in a dilemma. They require savings due to the fleeting work conditions that they experience. However, due to these economic conditions, they cannot afford to save. Financial experts recommend that people in their twenties should aim to save 25% of their annual income. Findings would suggest that very few millennials are able to reach this target.
There was much outcry last year when an Australian real estate mogul suggested that millennials should stop buying avocado toast, and instead focus on saving for their first home. Tim Gurner said “When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each”. The Australian was the focus of backlash from millennials. He even formed part of an internet meme.
In the event of another financial crisis, similar to the economic collapse of 2008, millennials could find themselves in a very difficult position. Neither does it bode well for the future of the overall economy. It is important that people develop saving habits at an early age, or else there could be a significant strain on pensions in the long term.