Gen Zers may wish they were financially independent at the age of 30, but right now they are particularly feeling the pain of rising prices.
A smaller proportion of Gen Z and Millennials have at least three months of spending on emergency savings than their older generation peers.
This is according to recent Bankrate survey results. This survey of American adults had 1,025 respondents and was conducted June 3-5. Gen Z in this survey was 18 to 25 years old and Gen Y was 26 to 41 years old.
According to this survey, 4 out of 10 millennials said they had at least three months of spending on emergency savings. Sixty-two percent of baby boomers said the same. With the personal savings rate of Americans falling in April to the lowest since September 2008 and the consumer price index standing at 8.6% in May, the younger generations could be particularly feeling financial difficulties at this time. .
“Inflation is a challenge for younger generations because they have to bear all the costs of inflation, but don’t necessarily have the assets that will help their balance sheet keep pace with inflation,” said Jeff McDermott, planner certified financial at Create Wealth Financial Planning, Bloomberg told Bloomberg.
One of the reasons for this result is simply the time it takes to accumulate money for savings, according to Greg McBride, chief financial analyst at Bankrate.
“It takes time to build up an adequate emergency savings cushion, and that’s especially true in the early decades of your career, when your household expenses often grow faster than your ability to save,” said McBride told Insider.
Overall, 24% of Bankrate poll respondents said they have more emergency savings than a year ago and 32% have the same amount. However, 34% said they actually had less now than a year ago.
“Overall, Americans are better off with emergency savings in 2022 than we’ve seen in recent years,” McBride said. “But, the level of comfort with these economies has dropped dramatically over the past two years. This can, to a large extent, be attributed to inflation.”
Generationally, 38% of millennials surveyed said they were at least somewhat comfortable with their emergency savings.
“And so the level of comfort with the emergency savings that you have was also higher for Gen Xers and baby boomers compared to millennials,” McBride said, where 41% of Gen Xers and 49% of baby boomers said they were at least somewhat comfortable. with their emergency savings.
Young Americans are currently feeling financial stress at a time of soaring inflation. Chris Motola, financial analyst at Merchant Maverick, told GOBankingRates that “Gen Zers face rising costs of living as they enter the workforce and are largely in entry-level jobs.”
Motola added that it’s no surprise that “the cost of living weighs heavily” on Gen Z and Millennials.
An Ipsos poll also suggests that Gen Z and millennials in the US don’t feel too comfortable with their finances. In this survey, 65% of Gen Zers between the ages of 18 and 24 said they were confident in their finances, down 10 percentage points from 75% in the last quarter of 2021.
Another survey that highlights the financial struggles of younger generations is the Deloitte Global 2022 Gen Z and Millennial Survey. “Financial anxiety is prevalent among Gen Z and Millennials,” according to this study. “They worry about their day-to-day finances and fear they won’t be able to retire comfortably.”
McBride said it was important to have emergency savings even in “the best of times.” However, it also plays an important role in the current state of the economy.
“Emergency savings are all the more important to get through a period of economic uncertainty,” McBride said. “The savings you can make now will provide greater comfort if the economy doesn’t do as well in the months ahead.”