Why Do Millennials Not Save Money

*This post has been reviewed by an Illinois Registered CPA. However, when making important financial decisions, it's best to speak with your financial advisor.

Last Updated on February 25, 2025

Find Out Why Millennials Can’t Save Money

According to a National Institute on Retirement Security report, more than 60% of millennials don’t have any retirement savings. This generation doesn’t seem to put a lot of money aside, at least not as much as previous generations, but why not?

There are different reasons why millennials can’t save money. Let’s look at some of those reasons and a few tips on how to start saving money if you’re a millennial in this situation.

The Financial Hurdles Millennials Face

Ah, student loans—the financial arch-nemesis of many millennials. With an average debt of around $30,000, it’s no wonder saving takes a back seat. Add in the rising cost of living, and it feels like the universe is setting up for failure.

Yet, it’s not all doom and gloom. With increased financial literacy, millennials are managing debt smarter. However, this doesn’t negate the exposure to financial strain, creating a real impact on saving capabilities.

Why Do Millennials Not Save Money – A Few Reasons

Millennials find it hard to save money for different reasons. Some stem from psychological factors, and others depend on the current economic context. Here are some of the significant factors that explain why millennials do not save money.

Millennials pay hefty loans

Loans are one external factor that prevents millennials from building a savings account. Millennials have debt even before getting a job and building their future. Many need a student loan to get through college. These loans often amount to hefty debts. The average student loan is around $30,000. Loans and their interest take years to pay off.

Millennials have lots of debts

Besides their student loans, millennials have other debts too. Many rely on credit cards to be able to sustain their lifestyle. Debts make it almost impossible to save, especially if they keep piling up. They also make it difficult for millennials to fix their credit. It can prevent them from getting a consistent loan such as a mortgage in the future.

Millennials don’t have a lot of financial education

Millennials have access to all sorts of information thanks to the internet. They are also highly adaptable and tech-savvy. These qualities help them thrive at work, yet, there is an area where millennials seem to lag behind, financial education.

This generation does not efficiently manage its finances. That is partially due to the economic context in which they grew up. It is not necessarily specific to their generation, as it seems multiple generations lack financial literacy.

Currently, millennials seem to prefer investing money in experiences or material goals. For example, a Finbold article suggests that millennials prefer to save for vacations (38%) and homes (30%) and ignore retirement investments.

Employers also seem to be less supportive when it comes to helping millennials build a retirement fund. Numbers show that only 81 Fortune 500 companies have been offering a pension plan in recent years. Twenty years ago, 288 of these top companies sponsored pension plans.

Some Millennials Spend Money More Easily

People in this age group are consumerists by definition and choice. They are the kids that grew up walking down the supermarket aisles with their parents. They could put everything they wanted in the shopping cart, which is a habit that is hard to give up later in life.

It extends to many other areas, such as spending on entertainment, hobbies, or clothing. For example, some buy apparel whenever they want, rather than when they need it. Almost 70% of millennials buy clothes for reasons that don’t qualify as necessity. According to the same source, 50% of millennials spend money on Uber or similar services and 70% prefer paying more to eat at a fancy restaurant.

Employers No Longer Offer the Same Retirement Plans

Compared to their parents, millennials enjoy fewer retirement plan options from their jobs. Back in their parents’ days, a good job also brought a good retirement plan. That is no longer the norm in today’s job market.

Millennials are flexible when it comes to employment. Few of them stay in the same job for their entire career. Six in ten millennials are ready to switch jobs. That is another reason they have lower chances of accessing and maintaining a good retirement plan.

Also, many millennials prefer freelance work, which means they don’t have an employer who might be willing to sponsor a pension plan. Unless freelancers pay for private pension plans, their work might not provide a retirement fund.

Millennials like comfort even if it’s costly

Ordering food from restaurants is an expensive habit, and many millennials enjoy it, considering themselves “foodies.” They prefer the gym to working out at home and going to the beauty salon for a nail job. These are simple things where millennials choose to spend money. These seem inexpensive individually, but they can add up to hundreds of dollars by the end of the month.

Many millennials like to live comfortably. They are used to paying someone else for things they could do on their own. For example, half of millennials use Uber for convenience, instead of driving. Paying for services such as these is why they don’t save money. Another example is that 81% of millennials make at least one impulse purchase per month.

Millennials are reluctant to live by their parents’ rules

Many millennials prefer not to follow in their parents’ footsteps, including in their spending and saving habits. Previous generations saved money in the bank for years. Millennials don’t embrace these institutions with open arms. Many are rather eager to explore other avenues. They try to make more money from what they manage to put aside rather than keep it in the bank.

Millennials are daring and creative and have a strong sense of entrepreneurship. Investing in a business is a standard option for most. According to an America’s Voice on Small Business survey, 62% of millennials would want to run their own business and 50% have taken active steps to accomplish this goal.

Prices are rising faster than wages

We can find all sorts of explanations for millennials’ lack of ability to save money, but it’s essential to be realistic. Millennials are not living in the right socio-economic environment to save money. Prices are constantly rising, and the pandemic has heightened this relentless increase. The inflation rate is the highest since 1981, reaching 8.6% as of May 2022. This makes it hard to save money and stay out of debt.

Now, it seems we are approaching a resources crisis. Any crisis will probably push the prices of oil and other necessities even further. All the while, the minimum wage seems to stagnate, amounting to $7.25 in 2022. These factors impact millennials’ finances and their ability to create a savings fund.

Millennials feel a higher pressure to spend

Today’s exacerbated consumerism and the urge to buy and own more make it difficult to save money. Society doesn’t motivate people to put money aside. Instead, it encourages you to spend more to feel happier, safer, and more satisfied. It is not only due to companies’ pushy marketing campaigns. It is a way of life.

Even having a social life, like meeting up with friends, means spending. In most cases, these social gatherings take place in bars or restaurants. The pressure to earn more and spend more to feel like we belong is constant.

Can You Even Save Enough Money to Retire?

Millennials are not saving enough to be able to afford many things, such as a house of their own. As a result, this generation may find it harder to obtain homeownership as easily as their parents. Also, 66% of this generation doesn’t have a retirement fund. Due to this, many millennials might not be able to retire until they’re in their 70s.

Dave Alison, the founding partner at Prosperity Capital Advisors’, agrees that this group is struggling to save money. As he explained in a Forbes post, “the burden of too much debt and monthly bills is the leading cause.” The cost of living makes it very difficult for most millennials to put money aside.

Alison also highlights the importance of financial education. He agrees that today’s adults were not taught, as kids, how to save money. Financial education is not present in any general formal education environment. Kids don’t learn about it at school. Then, later in life, they don’t focus on it. When they realize they need help, asking for financial advice because of debt feels embarrassing to many.

How to Save Money as a Millennial by Budgeting?

Careful budgeting is key to successfully putting money aside. A great way to save money is the budgeting envelope system. This method involves the following:

1. Divide your expenses into several categories (bills, food, gas, etc.).
2. Put money in different envelopes for each category of expenses.
3. Only use the respective envelope’s budget for each expense.

Another easy and effective way to budget is the 50-30-20 budgeting method. It means dividing your budget into three categories – needs, wants, and savings. Here is an example:

Available Budget: $6,000
Category with Examples	Budget Percentage	Budget Amount
Needs: food, gas, mortgage	50%	$3000
Wants: clothes, sports, entertainment	30%	$1800
Savings: retirement fund, savings account	20%	$1200

How Can Millennials Cut Down on Their Expenses to Save Money?

There are different ways to start saving money by cutting expenses. One of the most significant expenses millennials have each month is bills. One of the ways to start saving money is by lowering your utility bills. Here are a few tips for this:

• Use energy-efficient light bulbs
• Use cold water instead of warm whenever possible
• Unplug all appliances and gadgets when not in use
• Install ceiling fans instead of air conditioning

If you find it difficult to pay bills on time, use the half-payment method to spare money for these expenses. Unpaid bills gather penalties, which throw your budget off and prevent you from saving.

Investing as a Method to Save Money for the Future

Some millennials might be daring with their finances. Unlike their parents, some invest in different assets. Investments can be an excellent method to help your money make more money. Some potential assets to invest in are:

• 401K
• Roth IRA
• Mutual Funds
• Real estate

Regular stocks can also be a profitable investment strategy, although more volatile. Just imagine the following scenario:

Stocks investment yield example
Invested amount in stocks	$1,000
Profit per year	8%
Number of years of investment	5
Total amount after 5 years	$1469

Saving Money by Opening a Retirement Account

A retirement account is not only a safety net for the future. It is also a benefit you might get as an employee. If your company offers 401(k)s, why not take advantage? Your employer or the HR department will be able to tell you more about this option if it exists, but it is not their obligation to enroll you for a 401(k). You need to ask for more information about the retirement plans and your ability to access them.

Investing in a retirement plan can bring you benefits such as:

• Compound interest: the more time passes, the more interest you get. That means you can end up with a hefty amount if you start saving in your 20s and cash out in your 60s.
  
• Tax deductions: these are contributions taken from your paychecks. It happens before the federal taxes are applied. These are pre-tax contributions and help you lower the amount of taxes you pay on your income.
  
• Flexible Plans: paying debts and bills and putting money aside for retirement is not easy, but these plans are critical to a tranquil retirement.
  

The good news is no one forces you to contribute a certain amount. You can choose another plan with a lower contribution limit based on your income. Flexibility also means the ability to continue contributing, even if you change your job.

Many companies offer a consistent match benefit. Employers can contribute with a matching amount to your 401 (k). Take advantage of this great perk to help you save even more money when you retire.

Frequently Asked Questions (FAQs)

Why do millennials not save money?

Some of the most common reasons why millennials don’t save money are:

• Large student debts
• Credit card debts
• Stagnating wages
• Lack of budgeting and reckless spending
• Increasingly high prices

How can millennials educate themselves to save more money?

Millennials can change some of their habits to manage their finances better. Here are a few steps to get started:

1. Assess your budget and expenses.
2. Figure out where you spend the most and try to cut down on those expenses.
3. Put money each month in a separate savings account.

How to save money as a millennial by changing your lifestyle?

There are some habits you could give up on or change to manage to put money aside. These habits might answer the question, “why can’t I save money?” For example:

• Cook more often than you eat out.
• Drink coffee at home rather than at a cafe.
• Buy clothes during a sale.
• Ride your bicycle more often than you drive.

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