Rutgers students say that budgeting and saving are important, but the national savings rate is the lowest it has been since the Great Recession of 2008 and 2009 — a Rutgers professor offers advice.
At 2.4 percent, the national savings rate is the lowest it has been since the Great Recession, according to TradingEconomics. The savings rate for millennials is no exception to this trend.
Rutgers students agree that having traditional saving accounts is good since saving money is essential.
“There is always something to save for, especially at our young age. We have many things that we want to have, do, or accomplish, and all of them require money,” said Rafael Nunez, a student in the School of Graduate Studies.
Of young millennials, (those between 18 and 24 years old) 67 percent have less than $1,000 in their savings accounts, and 46 percent have $0, according to GOBankingRates,
“I live paycheck-to-paycheck, so there's never money left to save,” Nunez said.
According to Alexander Hohmann, an Economics professor at Rutgers, it is not that students do not want to save or do not understand the need of doing so.
Instead, the savings rates are low because our income level is among the lowest that it will ever be over our lifespan.
“Savings rates for people in their early 20s are low; often are negative because you have to pay back student loans,” he said.
Once we start working in full-time positions in our profession, then we have access to programs like the 401k, a tax-advantaged plan.
With the 401k, workers take some of their income and put it away--a good discipline for many.
"If you're the kind of person who prioritizes spending first and saving last, you may find that by the end of the month, you have spent your entire paycheck," said Hohmann. “The 401k is the simplest way to start saving once you start working.”
It is both uncomfortable and challenging to save money in this decade due to deregulations that allow banks to offer different deals to clients.
The diversity of choices of investment and traditional saving accounts that this generation has is higher than in the 1980s. “A sophisticated, informed saver has many more choices available to him or her,” Hohmann said.
Hohmann also explained that, in other ways, saving could be tricky.
To start a mutual fund, for example, one needs a minimum balance of $1,000 or in some cases $3,000. In this way, saving can be discouraging for those who do not meet the minimum.
Mobile apps are other tools that can enable consumers to make small changes to help put money aside.
“I could get by with a lot fewer things than I do. I drink too many Starbucks drinks,” Karolyn Kortenhaus, a junior in the School of Engineering, said. “It is important for people to be honest and ask themselves whether they can cut back on expenses.”
So how much income do you need to live and also have a disposable income to put away?
A website developed by the Massachusetts Institute of Technology (MIT) can calculate the living wage in different counties across the United States. It factors things like the cost of rent, food, transportation, etc.
“It highlights the fact that, for many people in certain professions, it’s impossible to set money aside in savings,” said Hohmann.
