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Why Millennials Are Faced with a Saving Deficit Problem?

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A recent study by Moody Analytics reveals that adults under age 35 have a negative 2% savings rate. It seems like the millennial generation have lost the art of saving. Rather than prepare for the future, retirement in particular, the millennials are busy drowning themselves in debt.

Despite technological advancements and economic growth for the last few years, saving tendencies continue to be low. Why is this? There are a few reasons expert cite and you’re better off knowing them if you don’t want to be like majority of millennials today.

Poor job market

While the economy has been better since the last great recession, you can’t say the same thing with employment rate. Youth unemployment, in particular, remains very high at 8.5%. This is the percentage of college graduates who can’t find a job. Others may have a job but only part time and majority of them are still hoping to land a full time one.

Unless the government does something about creating more jobs for young people, the saving deficit problem won’t go away. How can the millennials save, after all, when they don’t have a job that pays them enough?

Nearly Flat Wage Growth

Another major problem most millennials have to face today is the stagnant wages. Even those with jobs aren’t really financially comfortable to save more for the future or for retirement because of the super low if not flat wage growth. Income is less but the cost of living today has been increasing. How can the younger generation keep up?

The obvious solution which will help millennials learn the art of saving again is for policymakers to push for better wages and even increase the minimum wage for the middle class.

Millennial

Student debt

The cost of going to college today has skyrocketed to 250% over the last 30 years. It is not surprise therefore that the younger generation are drowned in massive student debts. This is another major reason why saving is even harder today. The typical college graduate in this day and age is straddled with huge debts to pay. Making the reality even harsher is the fact that a high percentage of said graduates are not guaranteed with jobs.

College graduates need help when tackling their mountain of student debt. Offering them refinancing options to make the monthly repayment more manageable is a good idea.

Poor Retirement Plan Offers

The last thirty years have proved to be a disaster for retirement plans. A great number of employees are no longer offering retirement plans for their workers. While there are individual retirement accounts the young workers can turn to, they are not exact adequate considering inflation.

Currently, statistics reveal that only 40% of millennials have retirement plans at work. This is another reason why the saving deficit is becoming a major concern. The young generation needs more access to any kind of retirement plan at work in order to get started with their retirement funds.

The Bottom Line

New policies that will resolve those aforementioned major problems will help millennials tremendously. But you can’t really rely on the government for speedy enactment of smart policies. Instead, what you need to do is understand the situation with an open mind then plan out your life from there. Remember that your future’s security is still largely dependent on your ability to save a small but consistent percentage of your income even during tough economic times.

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