Could millennials be practicing better financial habits than baby boomers?
According to a new survey by T. Rowe Price, millennials are doing a better job than their elders. Millennials, who participated in the survey, were more likely to budget and live within their means than Baby Boomers and to live within their means.
More millennials were also tracking their expenses carefully (75%) than baby boomers (64%) and millennials were more disciplined in sticking to a budget (67%) versus baby boomers (55%).
Baby boomers are saving slightly more of their salaries (9%) than millennials (8%). Millennials, however, have increased their 401(k) savings this year compared with baby boomers. Almost double the percentage of millennials are saving a higher percentage of their income in 401(k) contributions in the past 12 months compared with baby boomers (40% vs. 21%).
More millennials are happy with automatic enrollment in their retirement plans and almost half (47%) wish their employer had enrolled them in a higher contribution rate. The average enrollment rate was 3%.
T. Rowe Price surveyed workers of both generations who were contributing to their workplace 401(k) plans. Admittedly, Americans who are committed to saving for retirement are more likely to embrace better financial habits.
“It’s encouraging to learn that millennials are so receptive to saving for retirement and are generally practicing good financial habits,” says Anne Coveney, senior manager of Retirement Thought Leadership at T. Rowe Price.
The millennials in the survey were working for private sector corporations, with a median personal income of $57,000 and an average job tenure of five years.
Conveney noted that millennials are saving despite the recent flat income environment. “When they have the means to do the right thing, it appears that they often do. They are exhibiting financial discipline in managing their spending and are defying stereotypes that this generation is prone to spend-thrift and short-sighted thinking.”
Who Is Falling Behind
In a much smaller survey, T. Rowe Price also polled workers who weren’t saving in their 401(k) plans. The findings weren’t as encouraging.
In the survey, millennial women were less likely to save through 401(k) plans. About 68% of the non-savers were women. Within the sample of millennials who are currently saving, only 41% of savers were women.
When women do save, they save less than men. The average 401(k) balance for women is $38,000 (median: $11,000) compared with men, who have an average balance of $74,000 (median: $22,000).
Why are some millennials who have the opportunity to save via 401(k) plans, not doing so?
A big reason is because these Americans are making less money. Their median salary is $28,000 versus $57,000 for participating millennials. They are also likely to have student loan balances (66%) and their median student debt is $22,000. In addition, 39% of the non-savers say they are experiencing trouble meeting monthly expenses.
In contrast, among savers, fewer have student debt (51%) and their median loan balance is $16,000.