Perceptions about younger generations aside, a recent survey finds that a cohort of younger “super savers” is making real sacrifices to save, citing numerous motivations.
The survey by Principal Financial Group digs into the financial habits of Gen X, Gen Y (Millennials) and Gen Z (i.e., born after 1995) savers who are deferring 90% or more of the IRS maximum amount to their 401(k) accountor 15% or more of their income for retirement. It finds, among other things, that these super savers are highly motivated by wanting to:
- feel financially secure (62%);
- have a good lifestyle in retirement (57%);
- be prepared for the unexpected (43%);
- save enough for retirement (42%); and
- travel in retirement (42%).
To reach their savings goals, super savers report that they make sacrifices such as driving older vehicles (43%), owning a modest home (41%), not traveling as much as they’d prefer (41%) and doing DIY projects instead of hiring outside help (40%). Super savers aren’t all work and no play, however. These younger Americans still splurge on subscription services (46%), travel (46%), dining out (39%), entertainment (30%) and shopping (26%).
“Super savers are making smart financial choices, but they aren’t sacrificing their quality of life,” says Jerry Patterson, senior vice president of retirement and income solutions at Principal. “We make time for the things we find most important, and this group has prioritized savings and financial independence in a big way.”
The concept of young Americans saving big might sound foreign, but the growing FIRE (Financial Independence Retire Early) movement has been a rallying cry for young people, according to the study. In fact, it notes that some of these young savers can bank 70% of their take-home income into savings.
Confidence in Saving
Though everyone surveyed fit the definition of a super saver, only 24% self-identified as such. Of those who thought they were a super saver, 28% were men, compared to only 19% of women. Men were also more likely to be confident in their financial future (59%) compared to women (49%) and confident in financial decisionmaking (52% versus 40%).
As to methods used to verify if they are on track for their retirement goals, the use of online tools was cited by 65% of respondents, while 27% indicated they compare their information to information available from their financial advisor and 14% indicated it’s a gut feeling.
Of super savers overall, 41% indicated that they currently work with a financial advisor, while another 21% indicated that they don’t currently work with one, but plan to in the future.
Family Influences
By and large, super savers list their parents as their top influence on their savings habits (34%). Eight in 10 said their parents “were or are savers” and more than a third (35%) said their parents created savings rules for them when they were children. Seventy-one percent of super savers also started saving for retirement when they were in their 20s.
One apparent reason this cohort turns to their parents is a lack of personal finance education in schools; 81% said they learned little to nothing about personal finance in school, but 98% agreed that students should learn about it before graduating high school.
As for their financial advice for their younger peers, the top recommendations included:
- living within your means (60%);
- paying off credit card balances each month (43%);
- making sure to save enough to receive the maximum employer match (37%);
- saving at least 10% of pay in their 401(k) or 403(b) plan (32%); and
- creating an emergency savings fund (29%).
The findings are based on data collected from surveys completed May 22 and June 5, 2019, from more than 1,100 super savers and 900 pre-super savers comprised of Gen X, Gen Y and Gen Z participants who work for a company that uses Principal as their retirement plan recordkeeper.
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