But how much could they actually save – if they did?
A new study by LendEDU reveals that millennials (those aged 22-37) are unprepared for life’s important financial milestones such as retirement, with 49% spending more money eating out than they do saving for the future.
The survey of 1,000 American millennials sought to discover their spending habits and how much this generational age group saved for retirement each month. The researchers found that 37% of the respondents were not saving for retirement at all, and those that did saved an average of £376 ($480) a month.
The 49% that spend money on eating out and restaurants, pay out £127 ($162) a month while doing so. Only 6% of the respondents were not spending on dining out each month.
According to the survey, millennials’ average monthly spend on takeaway coffee is $38 (29.79) each month, with 27% spending more on coffee each month that they save for retirement.
When it comes to groceries, millennials spend an average of £220 ($281) per month, with 65% of them spending more on groceries that they save for retirement, while 3% do not spend on groceries, presumably because they still live with parents.
Here’s a summary some of the findings from the survey on what millennials spend on average:
- £127 ($162) each month on eating out
- £30 ($38) each month on coffee
- £59 ($75) each month on alcohol
- £31 ($39) each month on marijuana
- £220 ($281) each month on groceries
- £38 ($49) each month on concerts, sporting events, and other events
- £34 ($43) each month on tobacco, vaporizer, or JUUL products
- £5 ($7) each month on music streaming services
- £18 ($23) each month on gym or exercise expenses
- £64.20 ($82) each month on new clothes
How much could they save?
What this study highlights, is the excessive amount of the money millennials are currently spending on non-essential items each month, probably without even realising it. So, what if they changed their spending habits and started putting some of the money away each month for their retirement? How much could millennials save if they locked away savings from just a few non-essentials into a high interest ISA account for 5 years?
Below we have created a table that provides the answer (At an AER of: 8.70%)
|Current savings||Monthly savings||If you save||For||You could put away||Plus interest @ 8.7%||Total savings|
|Nil||From eating out||£127.01||5 years||£7,620.60||£1,685.11||£9,305.71|
|Nil||From alcohol||£58.80||5 years||£3998.40||1000.10||£4,998.50|
|Nil||From coffee||£29.79||5 years||£1,787.40||£395.24||£2,182.64|
|Nil||From tobacco||£33.71||5 years||£2022.60||£447.25||£2,469.85|
|Nil||From music||£5.49||5 years||£329.40||£72.84||£402.24|
Millennials who currently have no savings could actually start saving now if they chose to develop the habit of saving money. If you started and continued to save £127 each month for 5 years and 8 months, at an AER of 8.70, you could save £9,305.71, and this does not even take into account the potential tax-free earnings You could get through a tax-free ISA.
If you decided to split the monthly savings into half, such that you could still a bit of the luxury of eating and the occasional pint of beer and take away coffee, you could still be £8,243.43 better in 5 years.
It is interesting to note that the millennials that currently save money, save on average £376 each month for retirement. If they continued to save £376 at an AER of 8.7 for the same period of 5 years, they could save £28,088.14 including £5,152.14 in interest. Bearing in mind that the average is drawn from a sample of 1,000 millennials, £376 ($480) per month for retirement is a great start.
On balance, although more than two thirds of millennials (65%) are spending more on groceries than saving towards retirement, that expense is a necessary expense and arguably the cheapest way to fund three meals a day.