A new Gallup poll found that nearly two-thirds of Americans say that they enjoy saving money more than spending it. This strong preference is at least partially related to the “Great Recession” because lingering memories of the financial difficulties that can quickly arise from having inadequate savings during an economic downturn have likely caused many people to want to make an effort to set more money aside for emergencies. Surveyed young adults were found to be the most likely to prefer saving over spending, which is encouraging (as long as future behavior actually supports this preference) because Millennials are often criticized for being the least prepared generation when it comes to both short- and long-term financial challenges. For example, a recent study from Personal Capital found that 40 percent of surveyed Millennials said that they currently do not have a retirement savings account, and 73 percent reported that they have no idea what their own net worth is at the moment. Similarly, 49 percent of Millennials recently surveyed by Bank of America Merrill Lynch awarded themselves a grade of “C” or lower when asked how proactive they have been about planning for retirement.
Why are so many young Americans finding it difficult to save? A lack of wage growth is likely playing a role because “real median household income has yet to return to pre-recession levels, with the average American household earning $53,657 versus $57,357 in 2007, adjusted for inflation,” according to Bankrate. Another obstacle in the way of better retirement saving for many young adults is student loan debt. Indeed, Boston College’s Center for Retirement Research calculated that more than half of 20-something households currently have outstanding student loan debt, and that the average liability is $31,000. The researchers also estimated that the proportion of working U.S. households at risk of a lower standard of living when they retire would jump to about 56 percent after accounting for Americans’ ballooning student loan obligations. Similarly, a new PricewaterhouseCoopers (PwC) study found that 79 percent of surveyed working Millennials with student loan debt said that this liability has had a “moderate or a significant” impact on their ability to meet other financial goals. In fact, 63 percent of employee respondents who said that they are being held back by their student loan liabilities reported that they have less than $50,000 in retirement savings, and 32 percent said that they have already withdrawn money held in retirement plans to help pay for non-retirement expenses. These same respondents were also found to be more likely than employees without student loan debt to say that their personal finances have distracted them while on the job and hurt their overall performance in the workplace.
Sources: Gallup, Personal Capital, Harris Poll, BofAML, Benefits Pro, Bankrate, Squared Away, Boston College (CRR), Employee Benefit News, PwCPost author: Charles Couch