Millennials and Gen X More Likely than Boomers to Cut Discretionary Spending in Order to Save More.
New research from Ameriprise Financial, the Financial Trade-Offs study, brings good news but also some concerning findings. Americans surveyed are consciously cutting back in order to save more, and at least two-thirds say they have a budget and a monthly financial plan. However, the actions they’re taking financially – and the bills they have yet to pay off – show that all generations still have room for improvement.
The top three expenses that respondents have consciously cut down on are eating out (64%), entertainment (59%) and clothing and shoes (57%). Spending less on these things can be helpful in saving cash here and there, but Americans may not be making the trade-offs that could make the biggest impact on their finances. Respondents who’ve saved the most say they reduced spending on housing/rent (24% of respondents with these expenses have made this change), college education for themselves or their family (25%) and vacations (49%). These respondents claim to have saved an average of $361-$475 per month by making larger lifestyle changes in these areas.
Compared to other generations, Millennials are more willing to make trade-offs now in order to save for future goals, and say they’ve consciously cut back on every expense we asked about. Although it’s positive that millennials are inclined to save, they’re also more likely to say that they stretched themselves – especially when it comes to their mortgages; 77% of Millennials with mortgages say it was a stretch vs. 60% of Gen X and only 43% of Boomers. They may also be missing out on opportunities to save for long-term financial goals – only 57% with access to a 401(k) are contributing as much as necessary to get the maximum employer match (compared to 67% of Gen Xers and 69% of Boomers).
Suzanna de Baca is Vice President of Wealth Strategies at Ameriprise Financial where she is responsible for overseeing the firm’s retirement strategy, as well as initiatives to serve women and the affluent. Her commentary and quotes on retirement, family finances and women’s issues have been featured in numerous media outlets including the New York Times, Wall Street Journal, US News & World Report, Huffington Post, CNN Money, and CNBC. She earned her M.B.A. from Harvard Business School and her B.A. from Iowa State University. An active member of the community, de Baca has also served on numerous not-for-profit boards.