Millennials face a variety of barriers to saving

Writing for MoneyLion, Dawn Allcot identifies a number of barriers that are impacting the ability of millennials to save for retirement.

Millennials are today between 29 and 42 years of age. Allcot refers to them as “the generation often scolded for their love of pricey pleasures like Starbucks and avocado toast (that) now find retirement looming just a few decades away. Only 42 per cent are on track to retire by age 65,” according to research from Vanguard, she writes.

So, what’s blocking their savings efforts?

Top of the list, the article notes, are student loans.

“Student loans are a big problem for millennials, states Quote.com finance expert Melanie Musson in the article. “Laws that keep loans affordable for lower-income individuals also leave them with just as much debt 30 years after college or graduate school as they had when they left. It’s a huge problem to pay toward the loan every month without chipping away at it.”

The rising cost of housing is another barrier to saving, the article continues.

“Millennials are juggling mortgages that cost more than their parents’ first homes,” Julia Bartak, financial advisor at Edward Jones, tells MoneyLion. “High home prices and high interest rates mean they’re devoting larger portions of income to housing than prior generations. There’s an emotional response to feeling like all their financial bandwidth is going toward their mortgage, and that can push retirement savings to the back burner.”

Rounding out the top three is credit card debt.

“Debt is holding many millennials back from properly preparing for retirement. Experian data shows that 77.9 per cent of millennials have credit card debt, with average balances close to $7,000,” the article notes. This data is U.S.-generated, so that figure is in American dollars.

The tough economy and related difficult job market is also impactful when it comes to saving, the article notes.

 “Wages haven’t matched housing, childcare and healthcare cost increases. Basic expenses are taking up a big chunk of their income, so they’re not saving consistently. When you fall behind it’s hard to catch up, even as a high earner today,” the article notes. While we may not have the same healthcare costs as folks in the U.S. must deal with, the rising cost of living is a hot topic – and savings barrier – here in Canada.

Some millennials are part of the “sandwich generation,” where they are looking after aging boomer parents while raising kids of their own.

“Millennials are sandwiched between the declining baby boomer generation and the booming Gen Alpha,” states Mawuli Vodi of Financially Present in the article. “They have retiring parents who may or may not be able to support (their children) because they are settling into their own wants. Meanwhile, their Gen Alpha kids require a significant amount of help. Even if all goes well, Gen Alpha may end up living at home with their millennial parents.”

And even if the millennials inherit, a general lack of financial literacy may limit the benefits of the transferred wealth, the article concludes. Those receiving an inheritance need to “manage it well, protecting yourself and your family. Lack of financial literacy and poor planning is the biggest threat,” the article warns.

If you make long-term savings a part of your monthly budget, and automate that process, the money will zip into savings before you have a chance to think about spending it and will quietly build for your future.

The Saskatchewan Pension Plan provides great flexibility around automating contributions. First, it is you who decides how much you want to save. Then, you can set up pre-authorized contributions from your bank or credit card (PAC-PCC-application.pdf).

Once SPP receives your contributions, we invest them in our low-cost, professionally managed pooled fund, growing your savings until it’s time to collect them at income. When that day arrives, your choices include the security of a monthly annuity payment for life that can never run out, or the more flexible Variable Benefit.

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