Americans aren't saving enough, but Millennials do better than most
Nearly a third of Americans say they do not have any emergency savings, according to a new report. Yet, Millennials are the most likely out of all age groups to have enough funds to cover them for a few months.
Almost a third of Americans say they do not have any emergency savings, but they feel good about their financial health. Millennials, however, are better about building up their savings than other age groups, according to a new study.
Twenty-nine percent of Americans have no money saved up for unexpected events, such as being laid off, according to a Bankrate report released Tuesday. It is the highest level since the consumer financial services company started the survey five years ago. The numbers fall in line with another survey from NeighborWorks America from March, which found that 34 percent of US adults do not have emergency savings.
Despite the bleak number, there are signs of progress. People in the US are more comfortable with the shape of their finances than in previous years. Greg McBride, Bankrate’s chief financial analyst, says in a phone interview that people are feeling more secure in their jobs and more comfortable with their levels of debt. However, “savings is the missing link in terms of financial security.”
Americans 50 years and older are more likely than the population at large to have enough savings to cover them for six months, in part because they have had more time to save money. What might come off as a surprise is that people under 30 were the most likely out of all age groups to have enough extra funds to cover expenses for three to five months.
“Millennials got the memo on the importance of saving,” Mr. McBride says. “They do a good job of putting some money away for emergencies. This is a result of their financially formative years [coming from] the Great Recession.”
One in five Millennials have enough savings to last three to five months, he says. Another 27 percent have some extra cash set aside that could suffice for less than three months. “What you’re seeing from Millennials is a greater discipline or inclination toward saving compared to previous generations,” he adds.
Outside of emergency funds, Millennials are also saving more toward retirement, a recent study on retirement saving and spending by T. Rowe Price has found. Millennials are saving an average of 8 percent of their annual salary for retirement, while baby boomers are putting away an average of 9 percent. Three-quarters of Millennials track their expenses and more than two-thirds of them stick to a budget.
With the good news in mind, there are still areas that need improvement. The disparity of emergency savings between different income levels is stark. Fifty-three percent of those making less than $30,000 a year have no emergency savings, according to Bankrate. That is almost twice as much as the $30,000-$49,999 group. In higher income brackets, the difference is even greater.
What could lead to more Americans putting aside extra cash? Income has been stagnant, McBride says, but wages are starting see some growth. Hopefully, this will result in people across the board saving more money.
“Fingers crossed, we’ll see some better numbers next year,” he adds.