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Amid four-decade high inflation, younger Americans don’t have the emergency savings they need and are feeling financial stress

Jose Luis Pelaez Inc/Getty Images

  • Results from Bankrate show how many months’ worth of expenses Americans of different generations have in emergency savings.
  • Forty percent of millennials said they have at least three months’ worth, a smaller share than their older peers.
  • “Emergency savings is all the more important to weather a period of economic uncertainty,” Bankrate’s Greg McBride said.

Gen Zers may want to have financial independence by the time they’re 30, but right now they’re particularly feeling the pain of rising prices.

A smaller share of Gen Z and millennials have at least three months’ worth of expenses in emergency savings than their peers in older generations.

That’s according to recent Bankrate survey results. That survey of US adults had 1,025 respondents and was conducted from June 3 to June 5. Gen Z in that survey were 18-25 year olds and millennials were 26-41 year olds.

According to that poll, 4 in 10 millennials said they have at least three months’ worth of expenses in emergency savings. Sixty-two percent of Baby Boomers said the same. With Americans’ personal savings rate falling in April to the lowest since September 2008 and the Consumer Price Index standing at 8.6% as of May, those in younger generations may especially be feeling financial stress now.

“Inflation is challenging for younger generations because they have to bear all the costs of inflation, but don’t necessarily own the assets that will help their balance sheet keep pace with inflation,” Jeff McDermott, certified financial planner at Create Wealth Financial Planning, told Bloomberg.

One reason for this result is simply how long it takes to accumulate money for savings, according to Greg McBride, chief financial analyst at Bankrate.

“It takes time to build an adequate emergency savings cushion, and that’s especially true in the first few decades of your career when your household expenses often grow faster than your ability to save,” McBride told Insider.

In general, 24% in the Bankrate poll said they have more in emergency savings than a year ago and 32% have the same amount. However, 34% reported that they actually have less now than a year prior. 

“Broadly speaking, Americans are better positioned with emergency savings in 2022 than we’ve seen in years past,” McBride said. “But, the comfort level with that savings has plunged dramatically in the last two years. That can, to a large extent, be chalked up to inflation.”

At the generational level, 38% of millennials in the survey said they are at least somewhat comfortable with their emergency savings.

“And so the comfort level with the emergency savings you have was also higher for Gen Xers and Baby Boomers relative to millennials,” McBride said, where 41% of Gen X and 49% of Baby Boomers responded that they’re at least somewhat comfortable with their emergency savings.

Younger Americans are feeling financial stress right now during a time of skyrocketing inflation. Chris Motola, financial analyst at Merchant Maverick, told GOBankingRates that “Gen Z is facing an increasing cost of living while entering the workforce and largely working entry level jobs.” 

Motola added that it isn’t surprising that the “cost of living is weighing heavily” on Gen Z and millennials.

An Ipsos poll also suggests that Gen Z and millennials in the US are not feeling too great about their finances. In that poll, 65% of Gen Z aged 18-24 reported they were confident about their finances, down 10 percentage points from the 75% in the last quarter of 2021. 

Another survey that points to the financial woes of younger generations is The Deloitte Global 2022 Gen Z and Millennial Survey. “Financial anxiety is widespread among Gen Zs and millennials,” according to that study. “They are worried about their day-to-day finances, and fear that they won’t be able to retire comfortably.”

McBride said having emergency savings is important even in “the best of times.” However, it also plays an important role during the current state of the economy.

“Emergency savings is all the more important to weather a period of economic uncertainty,” McBride said. “The saving you can do now will bring greater comfort should the economy not fare so well in the months ahead.”

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