Only about half of all Americans — 53% — say they now have more money in their emergency savings than they owe in credit card debt — an unfortunate side effect of the pandemic.
It’s especially bad for young Americans, with much of Millennials and Gen Z saying the pandemic has eaten away at their savings.
During the pandemic, millennials, ages 26 to 41, and members of Generation Z, ages 18 to 25, were among those whose economies were hardest hit, according to a new Bankrate survey released Wednesday. surveyed more than 1,000 American adults in January 2022. Millennials were also more likely than other age groups to owe more credit card debt than is in their savings.
Nearly half of Gen Z respondents – 46% – say their emergency savings are lower in 2022 than they were at the start of the pandemic, while 43% of millennials said the same about of their savings. The results were even worse for millennials, those aged 26 to 32, with 54% saying their emergency savings had dwindled during the pandemic. By comparison, about 37% of Gen Xers said their savings had dwindled during the pandemic, along with only 27% of baby boomers.
“It’s a byproduct of the income disruptions that have been borne disproportionately by younger workers during the pandemic, especially millennials,” Greg McBride, chief financial analyst at Bankrate.com, told CNBC Make It.
In fact, the Economic Policy Institute found in 2020 that Gen Z was the generation most likely to see its members underemployed or unemployed due to the Covid-19 pandemic. The Pew Research Center also found that Americans aged 18 to 29, which spans both Gen Z and young millennials, were among the most likely to lose jobs during the pandemic, and they were the most likely to be forced to take a pay cut.
Unsurprisingly, for Millennials, their dwindling savings also coincided with an increase in their credit card debt. According to Bankrate, 32% of millennials say their current savings are less than they owe in credit card debt.
However, Gen Z and Gen X tend to do better than Millennials in this regard, according to the Bankrate survey, with only 23% of Gen Zers and 24% of Gen Xers saying their debt exceeds their savings.
“Beginning or reaching adulthood during a financial crisis really cements an aversion to debt and a greater prioritization of urgency,” McBride says. “The pandemic may well have this effect on Gen Z.”
Before the pandemic, millennials actually tended to save more and avoid debt better than older generations, as they were coming of age around the time of the dotcom bust and financial crisis of 2008.
“But periods of income disruption or outright unemployment can quickly erode accumulated savings and lead to credit card debt that didn’t exist before,” McBride says.
Overall, Bankrate found that the percentage of Americans who have more money saved than they owe in credit card debt fell slightly to 53% in January 2022, from 54% a year earlier. earlier. However, that number is actually higher than it was before the pandemic, when just 44% of people in 2019 said their savings outweighed their credit card debt.
As a country though, many Americans still lack emergency savings.
About 1 in 7 households have no credit card debt, but also have no emergency savings, which is a precarious situation in itself, as these households are more likely to have their finances disrupted by a significant and unforeseen expense, adds McBride. .
Bankrate recommends taking a look at your budget and determining where you can afford to set aside small amounts of money to start building your emergency savings fund for a rainy day.
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