A couple of years ago, Emilie Hunt had to go to the emergency room with a stomach virus. The bill took a huge chunk of money out of her savings, more than $800, and kept her from saving for a couple of months.
“I’m really bad at planning for unexpected expenses,” she said. “And instead of cutting other expenses, often the first money I cut is what would go into savings.”
Hunt, an executive assistant at a private equity firm in New York City puts $150, about 2% of her salary, automatically into a retirement plan every month. Her biggest expenses are rent, student loans and food, in that order.
She makes a budget, but doesn’t necessarily stick to it.
“I don’t feel that I’m in trouble,” she said. “But I feel like I’m not growing my savings at the rate I’d like to.”
Many millennials like Hunt are saving for retirement, but not enough. They put away an average of 8% of their salary for retirement, according to investment firm T. Rowe Price’s Retirement Saving & Spending Study, which looked at 1,505 millennials with 401(k)s.
That’s a lot less than the minimum 15% that most experts recommend.
So what can millennials do to save more for retirement? Here are five tips.
Before you sign a lease or buy a car, think about cheaper options. Housing and transportation are the two biggest costs for most people and significant commitments of your future income, said Stuart Ritter, senior financial planning analyst at T. Rowe Price. A small change can give you a lot of financial freedom.
“There’s a big difference between buying an expensive car, riding a bike or sharing a ride,” said Ritter.