Between stagnant wages and high student loan debt, it turns out millennials can’t fathom the idea of saving more than they actually need — if they can save at all.
Most young people don’t think they’ll save $1 million in their lifetime, according to a new survey from Wells Fargo. While nearly 60 percent of millennials have started saving for retirement, most of those who haven’t think they aren’t making enough money to save any.
The good news is: They’re trying anyway. “Almost half of the group who don’t think they can reach $1 million have already started saving,” says Joe Ready, director of Institutional Retirement and Trust for Wells Fargo. The path to creating a sizable nest egg is more achievable than many millennials might realize.”
It comes down to current salary. While 32 percent of millennials do think they can make it to $1 million, they’re the ones making an average of $53,000. For the other two-thirds of respondents, average salary was just shy of $28,000.
Regardless of income, most aren’t that optimistic about their future financial options. Nearly 3-in-4 young people believe Social Security will be gone before they retire and only half of respondents have a retirement plan, like a 401(k), in place.
Even though more than one-third of millennials are tackling student loan debts of nearly $20,000, 70 percent are still saving for retirement right now. According to the survey, 85 percent of millennials think saving for retirement is an important part of adulthood.
Only one-third of millennials say saving isn’t a top priority. Although saving may be sporadic for some, it’s encouraging that they’re already looking toward their golden years. But it turns out graduating into a recession gave many millennials serious reservations about investing their savings in the stock market.
“The fact that half of millennials have a fear of losing their savings in the market concerns me because being invested in the market at this age is only going to benefit this generation for the future,” Ready says. “The market has continued to generate returns for the long-term investor, and it is absolutely critical that younger people recognize this.”
The wage gap is still a big deal
According to the study, millennial men make an average of $10,300 more than their female counterparts. More than half of women report living paycheck-to-paycheck and 73 percent of women believe they won’t see $1 million in savings, compared to 56 percent of men. Women are less likely than men to have already started saving for retirement.
This is a continuing trend. Earlier this year we discovered that men are more confident investing their savings than their female peers. Despite being more financially aware than other generations, the gender divide among millennials is big. Men make more money, which means they’re able to save more and in turn, trust themselves to make better financial decisions.
So is the racial divide
The study says Hispanics earn less than the general population overall — more than $2,500 less, on average. But they are more financially aware than their peers: Two-thirds have a monthly budget (compared to 54 percent of everyone else) and 42 percent believe saving for retirement is a high priority (compared to 35 percent of the general population).
But it’s Hispanics that are putting more of their earnings back into their family. Thirty percent of Hispanic respondents say they are providing financial support for two or more generations of their family. For the rest of respondents, only 14 percent are giving financial support to extended family.