Challenges Facing Young Savers

There is information everywhere for younger workers, from the workplace to social media to financial apps and artificial intelligence-backed assistants. But as Generation Z and Millennials manage through the highest interest rates and inflation in years, experts continue to try and break through the noise to emphasize the importance of early retirement planning. Many in these generations are listening, with workplace retirement saving showing improvement in recent data—though they still face challenges like student loan debt and rising living costs. 

Employers play a crucial role in fostering a savings culture and offering support for financial wellness amid the din of financial advice, according to retirement strategists. Starting to save early and understanding the long-term benefits of compound interest are key strategies for young people to secure their financial futures, but equally important is finding ways to reach them that are convenient, interactive and effective. 

On Track, So Far 

Christopher Ceder, senior retirement strategist at Goldman Sachs Asset Management, says younger generations are more engaged with their finances than their older counterparts. Generally younger savers are putting away money earlier and at higher rates, with 60% of Gen Z and 70% of Millennials viewing retirement as a high priority. Additionally, 70% of Gen Z and 73% of Millennials feel fairly confident in their ability to save for retirement.  

“In contrast with my generation, Gen X, is in less positive shape,” Ceder says. “They didn’t take the immediate actions that they probably needed to make sure that their statements could really be on track. In many cases they’re trying to catch up.”  

He says that while the younger generation sees positive momentum with saving ahead, he’s also cautious. There are more challenges ahead that compete with young savers’ ability to pay for retirement, such as cost of education, child care, homebuying and inflation, which all have an impact on how they will be able to save. Additionally, participation rates in workplace savings plans have been an issue among younger generations. 

“The participation rates …. [are] not as high as the older generation,” Ceder says. “While there’s good progress for a portion of the younger generation. Getting that to be more widespread is one of the key challenges.” 

Talk About It 

Megan Warzinski, managing director of HB Retirement, says the biggest challenge for young savers has been making the decision whether to save into their retirement plan and save for the future, or to address more immediate needs, like student loan debt. To address this issue, Warzinski says employers should create a culture that motivates young employees to save early. 

“For someone just starting out, for a 22-year-old individual just entering the workplace, they’re not thinking about retirement and rightfully so,” she says. “But I think if we can create an environment where discussing savings and future is part of a company culture that really aids in combating against the desire to wait.” 

Employers should also keep considering ways to help employees pay off student loan debt, she says—with options available through provisions of the SECURE Act 2.0 of 2022 to other benefits programs aimed at helping people manage educational loans. 

 Warzinski also emphasized the role of education in financial planning, advocating for diverse content formats to suit different learning preferences, such as short video snippets and adviser consultations. Warzinski believes that combining technology with personal interaction is key, as financial decisions are significant and personal.  

“The challenges are reaching younger savers in the way that they want to be connected with,” she says, “The traditional means of holding a group meeting to talk to young savers may not be the best method. Now, it might be outreach through social media or through short videos or through articles. There’s a variety of ways that we need to be considered.” 

Social Media Overload 

Adam Johnstone, partner and financial planner at Cadence Financial Management, agrees that education through social media has significantly increased the financial literacy of younger savers. However, he warns against information overload from the internet. With so much content available to them, users are bound to see some posts that may conflict with recommendations that an adviser or workplace tool might be giving them.  

“When you feel like you’re being inundated with information and different opinions, it’s totally natural to feel overwhelmed by it all and simply throw your hands up,” he says. “Then [the participant] just makes no changes and kicks the can down the road.” 

Financial planning is a relationship business, according to Johnstone, and the key is to cultivate relationships with young savers and build trust. Therefore, even when they inevitably continue to see dissenting opinions across social media, young savers will have an adviser who cares about them and knows what their goals are.  

Ultimately, Johnstone’s main piece of advice to young savers, albeit apparent, is always to save more and save early. Given the time value of money and compound interest, he says, young people should take advantage of saving for retirement while time is still on their side. 

“I’ve always told people that none of my clients have ever complained about having too much money,” he says. “The more you can afford to save now, the better.”