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Younger Generation Faces a Savings Deficit

The Wall Street Journal

Sunday, November 9, 2014

After a flirtation with thrift after the recession, young Americans have stopped saving.

Adults under age 35—the so-called millennial generation—currently have a savings rate of negative 2%, meaning they are burning through their assets or going into debt, according to Moody’s Analytics. That compares with a positive savings rate of about 3% for those age 35 to 44, 6% for those 45 to 54, and 13% for those 55 and older.

The turnabout in savings tendencies shows how the personal finances of millennials have become increasingly precarious despite five years of economic growth and sustained job creation. A lack of savings increases the vulnerability of young workers in the postrecession economy, leaving many without a financial cushion for unexpected expenses, raising the difficulty of job transitions and leaving them further away from goals like eventual homeownership—let alone retirement…

For some young households, the inability to save reflects the weak job market, said Shai Akabas, an economist at the Bipartisan Policy Center. While unemployment nationally has fallen below 6%, workers age 25 to 34 have a 6.2% unemployment rate and those 20 to 24 face 10.5% unemployment.

“There’s people who really can’t save because they don’t have the means to save and that’s not a small group of people,” Mr. Akabas said. “If you’re in a $25,000-a-year job and starting a family, it’s going to be very hard to accumulate savings regardless of your consumption decisions.”