Millennials remain frugal, preferring to save their bonuses rather than spending them, another remnant of the financial crisis which left them averse to debt.

A large proportion of Millennials (42%) said they would save their bonus for retirement or an emergency while 12% would spend it, according to a survey by Capital One, a McLean, Va.-based financial institution. Only 7% of Gen Y-ers would invest the money while 2% would donate the additional money.

A contributing factor to why Millennials retain their cautious approach toward spending is because many of them grew up in households which were left in financial ruin after the recession, said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.

They have firsthand experience seeing their parents grapple with the problems that occurred when savings were depleted and debt was all that remained, he said.

Other Millennials entered a lackluster workforce and have faced stagnant wages, shifting their priorities to saving their bonus money or tax refunds, because their restrictive budgets do not often allow much of an opportunity to make progress toward building personal savings, said McClary.

Financial stability remains a priority for Gen Y-ers who revealed in the NFCCs survey that 77% of them have savings or investments and among those who are 18 to 34 years old, 37% of them are saving more this year than during the previous year.

This follows the sentiment reported in a survey by Bankrate, a North Palm Beach, Fla.-based financial content company, which found that 62% of Millennials are saving more than 5% of their income, an increase of 42% from last year. Other Gen Y-ers are working toward saving an even larger chunk of their salary with 29% who are saving over 10%, a rise of 22% from last year.

Millennials have a greater inclination toward savings, are more hesitant about consumption and have an aversion to debt that we haven't seen from previous generations, said Bankrate.com Chief Financial Analyst Greg McBride, CFA.

Investing and Retirement Returns

Witnessing firsthand the effects of the financial crisis made Millennials very frugal, but the downside is that too many of them remain exceedingly conservative in their asset allocations for their retirement portfolios, said Robert Johnson, president of the American College of Financial Services in Bryn Mawr, Pa.

They have very long time horizons, yet they are choosing to invest very conservatively, he said.

As they are saddled with large amounts of student loans, driving their savings for retirement to a later age, Millennials already face a greater challenge. Choosing less risky assets such as cash and government bonds will yield much lower returns, shortchanging themselves and generating the need to save even more money for their retirement.

The asset allocation of Millennials is way too conservative given their ability to bear risk as a result of their long time horizon, Johnson said. In essence, Millennials have the ability to bear the risk of the equity markets but not the willingness to bear risk.

The recent volatility in the market also makes Millennial investors nervous about the returns of stocks, said Bob Gavlak, a financial advisor with Strategic Wealth Partners based in Independence, Ohio

"It doesn't give them as much faith that equities will give higher returns than other investment strategies. in the long-term," he said. "Even though they may have 30 to 40 years until they will pull from their Roth IRAs or 401(k)s, they are concerned about how much risk they are taking and how to keep it properly balanced."

Many Millennials are still forced to choose between saving and paying off student loans debt, said Hollie Fagan, head of the registered investment advisor business at BlackRock, the New York-based investment firm.

Millennials are watching their spending more than this age group was doing a decade ago, she said. They were in high school and college when their parents lost decades of retirement savings during the financial crisis. Its no surprise that when they receive a bonus, they act responsibly with their money.

Gen Y-ers are incurring less debt than their counterparts did back in 2003, because they are putting off buying homes even though some of them have high levels of student loans.

The research conducted by Torsten Sl¿k, a Deutsche Bank international economist shows that Millennials, ages 25 to 35, attained less debt in 2015 than their counterparts did in 2003. The data demonstrates a 29-year-old in 2003 had an average debt amount of $41,761 compared to $36,810 in 2015 or a 33-year old owed $56,859 in 2003 and $52640 in 2015.

It is an urban myth that the young generation today is more indebted, it is the older generations that have higher debt levels, said Sl¿k in a research note. The reason is that since 2009 it has been difficult for Millennials to get a loan.

While they amassed record levels of student loans because of the increasing costs of college tuition and the ease of obtaining these loans, Millennials continue to have less credit card and mortgages, said Jim Triggs, a senior vice president of counseling and support of Money Management International, a Sugar Land, Texas-based non-profit debt counseling organization.

Millennials have not been inundated with easy to obtain credit cards like in previous years because credit cards are not being offered on campuses anymore, he said.