There's no question that each generation has a unique set of circumstances and experiences that form their values and goals. Baby Boomers and Millennials are no different in this regard. But what is it exactly that makes the Millennials and the Boomers handle their finances so differently, especially in their saving habits?
The Saving Habits of Millennials
Millennials have grown up during hard financial times as they've watched their parents and grandparents struggle to pay the bills, leaving little money left over to put aside for college, let alone retirement. Therefore, Millennials have developed different saving habits than previous generations.
Millennials realize the importance of saving for retirement, because unlike previous generations, the prospect of not having Social Security to rely on is very real to them. They have experienced first-hand the ramifications of bad spending habits and have witnessed the housing crisis at its worst, making them more inclined not to make the same mistakes. And it's probably because of such experiences that Millennials are currently saving about 7.5 percent of their income and actually started their savings around the age of 22.
The Saving Habits of Boomers
There are two segments of Baby Boomers, the first wave and the second wave. Most of the second wave of Baby Boomers are currently working, but will be retiring soon. The first wave, those currently 60-plus, started saving for retirement around the age of 37 and have a median savings of $50,000, according to Time.com. However, their younger counterparts, currently age 55-59, started their retirement savings around age 31 and have a median savings of $150,000, which means they might be able to retire earlier than first-wave Boomers who say they will work beyond their retirement age. In contrast, Millennials started saving for retirement at a much younger age. And, because they are more proactive when it comes to effectively managing their spending habits, they might very well be the generation that can actually choose to retire at or before their official retirement age. Only time will tell.
Possible Reasons for This Surprising Revelation
You would think since Boomers have been around longer and are now starting to enter retirement, they would be the generation more inclined to have a budget and follow it; however, that's proving not to be the case. But why?
Well, it could be that Millennials are ten times more likely to use technology such as apps and other online tools to monitor their spending habits and manage their finances. Another reason could be that Millennials are also more likely to seek advice and professional assistance ahead of a major financial decision than Boomers, as quoted in a recent article by CNBC.
The Bottom Line
For most Millennials, retirement could be almost 30 years away, giving them plenty of time for their thinking and saving habits to change, especially once they start having families of their own. However, let's hope that all generations continue to develop healthy saving habits so they can enjoy the retirement of their dreams.