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Have you heard of this financial trend called "soft saving"? It's a concept (or excuse) that Millennials and Gen Z are exhibiting – spending more now (and not saving) so they can enjoy their life. At first glance, it is easy for us to knock why this is a bad idea and claim younger generations are entitled, coddled, or lazy.
However – I think there is more to this trend. Many of these young professionals have seen, and heard from, their parents and prior generations work a career and not have enough for retirement, or feel they’ve sacrificed too much of their life to get to age 65, 67, or 70. And a lot of younger professionals are already worried that they’ll never be able to retire.
At the same rate, the explosion of technology, social media, and consumerism has made “keeping up with the Joneses” more prevalent than ever which, in my opinion, leads to bad financial decision-making and instant gratification behaviors that can really get people in trouble.
So, there’s a careful balance. I don’t think the conventional wisdom of “save as much in your 401k” is necessarily good advice. I also think individuals and families should enjoy their life today too – but I think there needs to be a thoughtful, intentional, and automated approach to spending, saving, and setting yourself up for financial security to enjoy your life today, and tomorrow.
If you're curious to learn more about soft savings, I recommend checking out the original article mentioned in this video. If you need assistance in staying accountable and getting back on track with your finances, don't hesitate to reach out to our team for guidance and support.
Any money questions you’d like answered? Our Money Hacks series is created from conversations we have with employees, investors, savers, and all people planning for their financial futures. What topics are on your mind for our next episode?
It's episode 108 of Money Hacks. There was an article yesterday on CNBC.com about “Soft Savings”. It said that millennials and Gen Z generations are exhibiting this financial behavior or strategy of soft savings, where they're saving less for their future so that they can enjoy, or they can enjoy experiences and enjoy their life today.
Now, I don't know if I'm a huge proponent of this concept. The article talked about how these generations feel a bit of overwhelming concern that they're never going to have enough money for retirement. And thus, want to ensure that they get to enjoy their life and have a good cushion to experience things and have the stuff that they want today.
I think there's a careful balance around this. You know, we're big proponents of working with individual investors inside their 401ks. Working with couples or families on how to make the best financial decisions for yes, their long-term financial goals. Yes, retirement but also for the financial priorities and goals that you have for today, tomorrow, in the next 5, 10, 15 years and so while I wouldn't say soft savings in which you're lowering your savings rate so that you can buy luxury goods or items that you really want to have today is the way to go.
I also empathize and don't think that it's as easy to cut those sorts of things out of your life so that you can be set 20, 30, or 40 years from now, just from a behavioral perspective. That's really hard for investors to get that to wrap around our minds. So, we're big proponents of helping you be intentional, helping you be strategic with your money, and making the best decisions for today, for tomorrow, and for your long-term financial goals.
And I think the key to that, the takeaway here for this Money Hacks is automating your savings, automating financial management, or your cash flow plan. Many of us do this already in our 401k. Every pay period, we have a certain amount or percentage that's taken out of our pay before it even comes to us and it's going into our long-term retirement savings.
And for the vast majority of millennial and Gen Z professionals in the workforce, that alone is going to put you on track to actually be set to have enough money for your retirement. Let's work on doing the same thing when it comes to other areas of our financial life, whether that's setting money aside for emergency savings, a financial goal or priority, or a life experience that you want to have in the next 1, 3, or 5 years.
So, I believe in having a strategy where you're automating and being really thoughtful about where your money is going every month. And setting it up so you don't have to think about it every pay period, every month is the key to enjoying your life today. Enjoying the soft savings financial experiences, they talk about in the article while also having the financial security and the financial success to be on track for the next 3, 5, 10, and even 25 years down the road.
So, we'll link the article here below. Check it out. Let us know what you think about it. And for more news and information on how to make the best decisions for your financial life, please keep coming back to us here at MoneyNav. Thanks!