Money makes the world go around. There’s no disputing that fact — between saving for retirement to building up capital for a new home or a college education, there’s no shortage of life decisions that revolve around money.
When it comes to saving habits for baby boomers and millennials, some may be inclined to naturally give the upper hand to the older, experienced and seemingly more wise generation. While this may seem like the best bet, research studies would have us believe otherwise by leaning in the opposite direction.
In terms of making smart finance decisions, TD Ameritrade‘s Next Generation Research study surprisingly found millennials to be the source of solid financial decisions over baby boomers. Typically, millennials are thought of as the self-serving, whiny generation that just wants a participation trophy, but that may not be the case in terms of frugality in saving choices.
When it comes to making decisions about finances, TD Ameritrade’s study concludes millennials’ savings actions to be superior. To be more financially stable like the younger generation, it is suggested that people follow their suit of the following actions: create a budget, set savings goals, ask for help and have flexible retirement expectations.
Regarding creating a budget, apps are being used at an increasing rate to help organize all the various finance transactions, and millennials are ten times more likely to use them than other generations. As such, it shouldn’t be surprising to learn that 80 percent of millennials have a budget in place as opposed to a mere 61 percent of baby boomers. The study found millennials are saving for goals outside of retirement which may contribute to their need to have a handle on finances at a more heightened level.
While baby boomers have the age of 65 set in their minds as the age to retire, this study also showed millennials to be more agile. It was found that 36 percent of millennials see the traditional retirement age as a sign to stop working versus 52 percent of baby boomers. Millennials rather look to saving a specific amount of money to help determine their retirement age. This could mean millennials retire anywhere from age 40 to 75 or beyond depending upon how much is stowed away in their savings accounts.
Breaking Down Millennials Spending
In a LendingTree survey of over 2,000 millennials’ financial habits, there were some surprising findings about this age group to further validate that it’s the generation to financially emulate. It goes to prove that millennials are strategic when it comes to knowing what to spend on and what to save for in the future.
Among the top reasons found for millennials making the move to save their money are: emergency funds, buying homes and traveling. Similar to TD Ameritrade’s study, this reinforces millennials’ desire to have financial goals outside of retirement age. To help bolster this notion, it was found that nearly 66 percent of millennials decide to spend money on experiences rather than spending it on random purchases.
Not surprising, the rate of setting aside money into savings accounts declined as salaries for millennials increased to a higher dollar figure. “When we looked at how often millennials chose to save by their salary range, we found that over 74 percent of those making less than $15,000 a year made sure to put a lot of that money aside. However, as salaries rose, the likelihood of saving dropped. Less than 72 percent of those who made between $15,000 and $30,000 a year made savings a priority. And still fewer – less than 71 percent – of those who earned $31,000 to $50,000 saw the value in saving.”
Given the variety of areas millennials are willing to spend and their access to finance planning tools like apps, today’s financial planning may be a more complex system than what it was for previous generations. Whereas baby boomers were likely raised to save solely for retirement, access to technological advances have helped propel millennials into other modes of thinking when it comes to saving.
Perhaps we will see a move toward baby boomers taking a savings lesson or two from their millennial counterparts further down the line.