“I think it is fantastic,” he said.
Over the past several years, a trend has emerged thanks to different blogs and books, advocating an extremely high savings rate - over 50% - in order to retire at age 35 instead of 65. Some who follow the movement don’t even plan to fully retire, but instead pursue a passion once they achieve a certain nest egg of savings. The movement even has its own catchphrase: FIRE — that is, financial independence, retire early.
“Millennials I think have been aware because they lived through some really difficult financial moments early in their childhood and now they’re taking over responsibility for their own personal savings,” Schwab said. “They don’t want to be where some parents ended up being who didn’t save adequately.”
Schwab is and author of the new book, “INVESTED: Changing Forever the Way Americans Invest.”
The other force fueling the financial independence movement is higher life expectancies.
“People know they’re going to live a lot longer than their parents or their grandparents, so they [got to] be prepared,” Schwab added.
How to save money and still pay all your bills
Schwab acknowledged that challenges of attaining a sky-high savings rate.
“I don’t know how [millennials] do it, actually, because most of us, early on, don’t make that much income when we’re really young and how do you pay for your rent?” he noted.
With that, Schwab said the traditional financial advice of saving 10% of one’s income is a working number, but he praised a 15% or even 20% savings rate.
“What a great outcome,” he said, referring to the higher savings rate.
Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.
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