By Ryan Velez
According to a recent Bank of America survey reported on CNBC, 1 out of 6 millennials has $100,000 or more in savings. Not a bad sum at all (note that the age range for this survey means between ages 23 and 37). However, there’s one hitch here, as while these millennials are doing a great job of savings, the youngest millennials are having far less.
A 2017 GoBankingRates survey found that most “young millennials” — which GBR defines as those between 18 and 24 years old — had less than $1,000 in their savings accounts. Nearly half had nothing saved at all. What’s more disturbing is the trend that these 0-saving millennials are growing rather than dropping. In 2016, 31 percent had $0, compared to 46 percent in 2017. Older millennials aren’t necessarily doing great either. 61 percent had less than $1,000 in their savings accounts and 41 percent had nothing at all. The percentage with $0 in savings had increased overall as well.
So, what can millennials do to stave the tide? Well, the ideal amount of savings needed varies on need, but there are some basic rules that you can follow. money expert at Intuit Kimmie Greene has a simple formula to help you figure out if you’re setting aside enough money.
During your 20s, she recommends that you try to save 25% of your overall gross pay. “That 25 percent is the combination of 401(k) withholdings, matching funds from your employer and any cash savings that you have,” she notes. “It can also include debt repayment.
“Just make sure your lifestyle expenses don’t exceed 75 percent of your gross income.” By the time you are 30, the next goal is to try and have the equivalent of your annual salary saved. Note that this number can be spread across several types of savings, including any retirement-account contributions, matching funds from your company, cash savings or money you have invested elsewhere, like in index funds or with robo-advisers. By 35, you want to double that number, and so on every five years.
This is similar to an idea from Fidelity Investments, which suggests that you should have the equivalent of your salary saved by age 30 and to have 10 times your final salary in savings if you want to retire by age 67.
“While this can sound super daunting today, if you’re putting that money to work starting in your 20s, it’s not as difficult as it sounds,” says Greene.