Of all the generations, millennials saved the most in 2023. When it comes to saving, irrespective of your age, you’re most likely saving for at least one milestone, whether it’s buying your first car, starting a family, buying a home, or saving for retirement.
Your objectives for saving are likely to change as you age, and so will the amount in your savings account. This is why it’s important to have a vision and set up a savings plan that aligns with your present financial situation and future objectives. Now, let’s explore and compare the average savings among different generations.
Average Savings by Generation
Every generation’s savings vary based on the economy, cultural attitude toward saving, and individual financial state. According to a New York Life study, here’s a representation of the average savings by each generation in 2023.
Millennials took the lead with an average savings of $9,299 in 2023. With over $6,000 saved, Generation Z followed closely, and Generation X finished in third place with an average of $5,132 saved for the year. Baby boomers saved the least amount, just over $4,000.
The Factors That Can Impact Saving
Many factors can impact a person’s ability to save. Generally speaking, the younger generations face the largest barrier to saving: time. With less time spent in the workforce and less time paying off debt, savings account balances tend to be lower.
Furthermore, the amount you can save tends to grow at a slower pace during your earlier years, especially when you’re adjusting to life as an adult and starting your career.
Cost of Living
Another contributing factor to saving is the cost of living. The rising costs of education and everyday goods are making it harder for younger generations to maintain financial stability.
Covering the high costs of basic needs like rent, groceries, and transportation can be challenging, making it more difficult to set aside money for savings. This is a huge constraint for individuals in this economy.
Student Loan
The increasing cost of education has made it harder for many millennials and Gen Zers to save money and make long-term plans, leaving them with significant federal student loan debt. It is unfortunate that a significant amount of their income goes to debt repayment rather than savings as they struggle to repay these loans.
Despite their best efforts, they are financially vulnerable because of this financial burden; which makes it difficult for them to build up substantial savings, invest in goals for the future, or set up an emergency fund.
Credit Card Debt
Credit card debt can greatly hinder savings. And many people are having difficulty paying off their debt, which has reached a record level of $1.115 trillion. The average credit card amount of Generation X at $9,123 is the highest, followed by that of millennials at $6,521.
Plus, the high interest rates on these loans might result in substantial monthly payments, reducing available savings funds. Because of this financial strain, it is challenging to accumulate an emergency reserve or make investments toward future financial goals.
Mortgages
Baby Boomers struggle to save because of the impact of mortgages in the financials. A large number of boomers still have mortgage debt, which frequently calls for high monthly payments. These payments can put a strain on their finances if they have retirement funds or fixed salaries.
The need to prioritize mortgage payments over savings means less money is available for emergencies, travel, or healthcare. Additionally, financial planning for retirement becomes more difficult because growing property taxes and maintenance expenses further restrict saving.
Car Repayments
Car repayments can significantly affect boomers’ capacity to save. Monthly car loan payments can be a big burden on fixed incomes, particularly for boomers who are counting on retirement savings. Additional expenses like fuel, maintenance, and insurance for cars can strain their finances.
These financial obligations reduce the amount of money available for savings, emergencies, or leisure activities. For many Boomers, maintaining a decent lifestyle while managing these costs can be very difficult.
Tips to Grow Your Savings
It’s never too late to take control of your financial future, regardless of when you’re starting out or getting close to retirement. It is also true that every age faces unique challenges and opportunities when it comes to saving money.
However, everyone is aware of the importance of saving and how useful it may be in times of need. So don’t panic if you feel that the amount in your savings account isn’t quite what you would like it to be. Here are some steps you can take to increase your savings:
Pay Off Your High-Interest Debt
Focus on paying off high-interest debt to free up budget space for savings. Make it a priority to pay off high-interest loans as soon as you can, like your school loans. This may require temporarily putting savings on hold.
Plus, the long-term financial burden is lessened when debt is paid off since high interest rates might cost more than savings account returns. This allows you to put more money into savings over time.
Find Ways to Cut Down on Expenses
Review your monthly spending to find areas where you could generate savings. Though they might not seem like much, unused memberships and subscriptions, unnecessary spending, and regular food deliveries add up quickly. So, take your time to identify these areas and consider reducing or removing them.
Over time, you can greatly increase your savings by transferring even a small portion of these reductions into your savings account. You’ll be able to save more efficiently without making significant lifestyle adjustments if you are aware of where your money is going.
Automate Your Savings Contributions
It can be difficult to save money on a limited budget, and the psychological barrier of watching your balance decline just makes it more difficult. One way to get around this mental barrier is to automate your savings contributions.
You can save consistently without the stress of manual transfers if you set up automated transfers from your checking account to savings. By doing this, you can guarantee consistent improvement toward your financial goals without having to worry about your balance declining.