Young people have high hopes for their financial futures: 53 percent of millennials (defined here as those aged 21 to 37) expect to become millionaires at some point in their lives, if they aren’t already, according to a recent survey from TD Ameritrade.
But to reach that goal, they need to sock away some serious cash. So, how much are millennials actually saving each month?
LendEDU, which surveyed 1,000 Americans between the ages of 22 and 37, found that millennials put an average of $480 per month into retirement savings. That means they’re off to a strong start: Compounded over 40 years with an annual rate of return of 6 percent, that could add up to about $900,000.
However, not all young people are prioritizing the future. Though on average, millennials put more money per month towards long-term savings than they spend on restaurants or lattes, the survey reports that 49 percent spend more on dining out per month than they put towards retirement, and 27 percent spend more just on coffee.
To some degree, this makes sense: Many young people, especially those straight out of college, haven’t set up retirement accounts yet, but “they have likely been paying for coffee and dining out for quite some time,” Mike Brown, a research analyst at LendEDU, tells CNBC Make It. “So it would make sense that a solid contingent is spending more each month on one thing than saving for retirement.”
Still, the number of millennials who aren’t saving, or feel like they can’t save, anything is alarming. LendEDU’s survey found that 37 percent of those between the ages 22 and 37 don’t save for retirement at all. They don’t have much in terms of short-term savings, either: A 2017 GoBankingRates survey found that most “young millennials” — those aged 18 to 24 — had less than $1,000 in their savings accounts.
No matter how much you’ve set aside, it’s possible to begin growing your retirement savings today. Here are three easy ways to get started:
- Put as much of your income as you can in a retirement account on a regular basis. If you’re funding a 401(k), the contribution limit for 2018 is $18,500 for workers under age 50. If you’re funding a Roth IRA or traditional IRA, the maximum yearly contribution is $5,500 for workers under 50.
- Automate your contributions. Have your employer do a payroll deduction or have your money taken out of your checking account and sent straight to your retirement account. After all, you can’t spend money you don’t see.
- Get in the habit of upping your savings consistently, either every six months, at the end of each year or whenever you get a raise. Again, if you make this automatic by setting up “auto-increase,” you won’t forget to up your contributions, or talk yourself out of setting aside a larger chunk.
