Posted on 12/10/2014 5:35:43 AM PST by Kaslin
Time is money. And the Millennial generation, which is now making headlines for its low savings rate, seems to have missed that lesson completely. Astoundingly, a new study by Moody's Analytics says most adults under age 35 have a savings rate of negative 2 percent!
In fact, Millennials are taking on so much debt, and saving so little, that their net worth is actually declining as a group. It's become a lifestyle habit to spend all you earn -- and more. Just look around the fancy restaurants, the chic hotel bars, the designer clothing stores -- and you will see these spots populated by the generation that was born between 1982 and 2004.
Millennials' negative savings rate compares with a positive savings rate of around 3 percent for those age 35 to 44, and 6 percent for those 45 to 54. Those over age 55 have gotten the message; they have a savings rate of 13 percent, according to the Moody's report.
There are plenty of excuses Millennials can make for not saving -- and some of them make a good point:
-- I'm just getting started, and working at a low-wage job.
-- I'm overwhelmed with student loans, and have no money to save.
-- This is the time to buy stuff -- just setting up my first apartment or home.
-- Babies cost a lot of money!
-- The stock market is just a "rigged game," and your money goes down the drain.
But whatever your excuse for not saving, the impact of this decision will be magnified over the years. If you had just started saving a hundred dollars a month in 2008, and invested it in a diversified stock market fund inside an Individual Retirement Account or your 401(k) at work, you would have doubled those initial contributions, and had huge gains on your additional small, regular investments.
The Dow Jones Industrial Average has more than doubled from its lows of around 6700. And history shows there has never been a 20-year period, going back to 1926, when you would have lost money in a diversified stock market portfolio with dividends reinvested -- even adjusted for inflation.
Even a small amount of regular savings, magnified by time and exposed to growth opportunities, can set you on course to financial freedom. The amount of time you save and the regularity of your investments actually matters more than the amount of money or the investment decisions.
The Savings Secret
There's a simple truth to finding money to save: If you don't see it, you won't spend it!
Money that is taken out of your paycheck automatically and diverted toward savings and investment is money you aren't tempted to spend. After all, FICA (Social Security) and income taxes are taken out of your paycheck before it hits your bank account. And you can't complain that you "can't afford" those deductions!
It's more difficult to start saving than it is to keep saving. As the money piles up -- even a small pile -- out of your immediate reach, it becomes an incentive to keep saving more. Then one day your money starts growing on its own though your investments. That creates a whole new motivation to add to your savings.
Some Savings Tips
It's difficult to cut back on your current lifestyle, so the best way to start the savings process might be to figure out how you can earn just a little bit more every month. That doesn't mean asking the boss for a raise.
It might mean getting a weekend job, not necessarily in line with your career. But you could become a restaurant server or a babysitter for your neighbors on weekend evenings. Use that newfound cash to both pay down expensive debt -- and to build a savings reserve.
Sell something! You may own a lot of stuff that you don't need anymore. Selling, even at a low price, will do two things. First, it will serve as a reminder of how you wasted your money in the past. And second, it will jump-start your savings program.
Put the new money somewhere separate from your everyday checking account. Open an account at another bank. When you're just getting started, convert the cash you have into hundred dollar bills, saved in a secure place. It's much harder to spend a $100 bill than to slide a $20 out of your savings stash! And even saving your pocket change can add up in the long run.
Want proof that even a little bit of saving may make a big difference in your financial future? Consider this:
If you saved just $40 a week and invested it in a stock market mutual fund (an S&P 500 index fund) inside an IRA, and reinvested all the dividends -- and if the market performs, on average, as well as it has done for the past 60 years (a 9.9 percent average annual return) -- then in 50 years you could have an account worth $2.5 million!
Of course, no one is making any promises about the future. And there will surely be lots of ups and downs for the market in the coming decades. But isn't it worth making an investment of about $6 a day and taking the odds that you'll come out way ahead, by millions of dollars?
Time is money -- and it's your choice how you spend it. That's The Savage Truth.
One thing I’ve noticed among professional Millenials in my office is that they’re loading up their credit cards to “earn points” on other things. It’s the old “I have to spend money to make money” mentality, and it’s getting worse.
I had one co-worker spend $2500 on an Apple laptop which he didn’t need (he has a corporate-issued Mac Book) so that he could get points to fly to Vegas “for free.” I was dumbfounded by the logic, but this is how they think.
Why not? Uncle Sam is setting the example..........
What about the lesson now being taught by the Leftists running the country: Why save? We are just going to take it from you anyway and give it to someone we determine is more deserving?
Not surprising.
I don't think it's astounding at all. Government education, tax structures for the 'working' - those privileged users of public aegis in all things, those uncaring unfeeling automatons - are all collectively aligned against self-sufficiency (which brings the ability to be individual, singular, and free to choose). This government and its entitlement society WANTS them to end up in a position with no choice whatsoever but theirs - complacency and capitulation to the greater good. That's why
The Millennials have to now support criminal illegal
aliens, their healthcare, their education,
while THEY WORK for the rest of their short lives,
controlled by the EXEMPT and the DeathCARE panels.
The upside is that this is very good for the economy. Think about it. If women stopped buy all the junk they want the country would go under.
Yup. And the thought is that ‘other people’ will cover the deficit. I have nephews age 40+ who are still living under their parents’ wings, without a care in the world. Gonna be colorful when TSHTF.
The huge problem with this anti-savings attitude is that the greatest gains are made on the money that’s invested earliest. For example, a dollar invested at a 9.6& rate of return will double in about 7 years. If someone 25 years old invests that dollar and retires at age 60, it will have doubled 5 times to $32.00 Thus, “pensions are for the young” because the really big returns on a long term fund only occur at the end of the holding period. IOW only the early investors make the really big bucks.
BTW the term, “pensions are for the young” is a direct quotation from a presenter at a forum on pension law that an employer sent me to when I was 27 years old. That old fart, probably in his 50’s at the time, said it at the beginning of his presentation, pulled out his charts and absolutely proved it. I sat here shocked, seeing how easy it actually was to provide for my retirement, and followed his advice ever since. Now I’m comfortably retired, in good part because I took that advice. Tragically, most Millennials probably have never even seen a presentation like that.
They are “owed” fancy dinners, trips to Vegas, 3 lattes a day... I always try to get younger employees into the 401k plan.
“What about the lesson now being taught by the Leftists running the country: Why save? We are just going to take it from you anyway and give it to someone we determine is more deserving?”
My lefty niece (wait for the logic) said the same thing. Then she gave us the beautiful part of all of this. “With global warming killing us, I will never live long enough to see retirement so why not run up all the debt I can since I won’t have to pay for it?”
I would never hit my children, let alone my sister in laws stupid kids, but on this one I managed to catch the back of her head just right, sending her face into the mash potatoes.
And as much as I love my kids, let alone my sister in laws stupid kids, I had to let my niece have it. “Sister, I think it best your daughter becomes a lesbian as it would be a disservice to the world if she breeds.”
Needless to say, the daughter still doesn’t speak to me. Thank god....
Wow. That's... I want to laugh and cry at the same time!
Points are nice, you can get free stuff after a while, randomly!
But buying a 2.5 grand laptop just to get a trip with the points (that’s actually a good point return) is stupid. You get points from stuff you buy anyway, like food or gas, rent/mortgage/car payment if they accept card. Getting that 1% back is better than nothing back. But buying stuff just for the points is stupid.
Rats have been plotting for years to get their hands on the trillions in tax exempt retirement savings that people are accruing. Their logic - it's just not fair that some people are saving money for a comfortable retirement while others are not (whether or not those who are not saving could if they wanted is beside the point).
Obamacare is a devious way of divesting people of money they might otherwise save. Higher and higher premiums take money out of people's pockets so they have less and less to save.
Rats despise low gas prices. Cheap gas allows people to keep more of the money they earn and spend it as they will, rather than send huge chunks of it to federal and state gubmints in the form of gas taxes.
Anything that can be charged, I charge. I tried to buy a new car with my credit card, the dealer wouldn’t go for it. I get 01.5% cash back and haven’t paid any interest in many years.
What you said is true, plus the more an individual has their own assets, the more they might think for themselves and act more conservatively. The destruction of the middle class is a necessary step for the fantasy revolution that is the Marxist dream.
Not off topic, trust me:
Weird Al Yankovic’s latest parody “Foil” is a sendup of “Royal” by Lorde so I watched the original to better appreciate the parody. It depicts young Millenials in a state of deprivation of the finer things in life, lamenting their lack of the means to acquire these, with sheer youth as their only real possession.
Of course, Millenials aren’t the only age class to have neglected the opportunity to save for the future. A lot of my fellow Boomers are expecting to survive on Social Security alone.
My son is in this demographic.
He has friends who max out their credit cards, then just pay the minimum payments each month. So if the have a $2500 limit on a card, when they use that up, they don’t think “I owe someone $2500”. They think, “I owe $x as the payment each month”.
They have no intention of ever repaying the principle.
Then they go and get another card. Rinse and repeat.
“I always try to get younger employees into the 401k plan.”
GREAT!! For the powerful dynamics of compound earnings, compounded over an entire career, please see my post @ 10 and feel free to use the “pensions are for the young” quite. It hit me so strongly at the time that I remember the exact words to this day, and I’ll be 72 on Dec. 20, God willing.
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