Only about half of all Americans – 53% – say they now have more money in their emergency savings than what they owe in credit card debt — an unfortunate side-effect of the pandemic.
It's especially bad for younger Americans, with a large chunk of millennials and Gen Zers saying the pandemic ate away at their savings.
During the pandemic, millennials, who range in age from 26 to 41, and members of Gen Z, who are between the ages of 18 and 25, were among those whose savings took the biggest hit, according to a new Bankrate survey released Wednesday that surveyed more than 1,000 U.S. adults in January 2022. Millennials were also more likely than other age groups to owe more in credit card debt than what's in their savings.
Nearly half of the Gen Z respondents – 46% – say their emergency savings is less in 2022 than it was at the start of the pandemic, while 43% of millennials said the same thing about their savings. The results were even worse for younger millennials, those between the ages of 26 and 32, with 54% of them saying their emergency savings declined during the pandemic. By comparison, about 37% of Gen Xers said their savings declined during the pandemic, as well as only 27% of baby boomers.
"That's a byproduct of the income disruptions that were disproportionately borne by younger workers during the pandemic, particularly millennials," Greg McBride, chief financial analyst at Bankrate.com, tells 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 on account of the Covid-19 pandemic. The Pew Research Center also found that Americans between the ages of 18 and 29, which covers both Gen Z and younger millennials, were among the most likely to lose a job during the pandemic, and they were the most likely group to be forced to take a pay cut.
Not surprisingly, for millennials, the decrease in their savings also coincided with an uptick in their credit card debt. According to Bankrate, 32% of millennials say what they now have in savings is less than what they owe in credit card debt.
However, Gen Z and Gen X tend to be doing better than millennials in that regard, the Bankrate survey finds, with only 23% of Gen Zers and 24% of Gen X reporting their debt exceeds savings.
"Just starting out or coming of age during a financial crisis really cements an aversion towards debt and a greater prioritization of emergency," McBride says. "The pandemic may well prove to have this effect on Gen Zers."
Before the pandemic, millennials actually tended to save more and avoid debt better than older generations because they were coming of age around the time of the dotcom bust and 2008 financial crisis.
"But periods of income disruption or outright unemployment can quickly erode what savings have been built up and result in credit card debt that didn't previously exist," McBride says.
On the whole, Bankrate found that the percentage of Americans who have more money saved than what they owe in credit card debt has declined slightly, down to 53% in January 2022 from 54% a year earlier. However, that number is actually higher than it was before the pandemic, when only 44% of people in 2019 said their savings outweighed their credit card debt.
As a country though, a lot of Americans still don't have any emergency savings.
Roughly 1 in 7 households have no credit card debt, but also don't have any emergency savings, which is a precarious situation in its own right because those households are more likely to have their finances disrupted by a large, unexpected expense, McBride adds.
Bankrate recommends taking a look at your budget and figuring out where you can afford to set aside small amounts of money in order to start building your emergency savings fund for a rainy day.
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