Millennials and Financial Resilience

Jeanne de Cervens is Project Director, Business for Impact AgingWell Hub, at the Georgetown University McDonough School of Business.

Retirement resilience is a characteristic associated with older adults during the pandemic. Yet a recent national survey by Business for Impact’s AgingWell Hub at Georgetown University (the “Georgetown report”) shows that Millennials and Gen Z adults also display this trait. As the nation works its way out of the pandemic, this resilience as well as lessons learned will help young adults not only get back on financial track, but also to become more resolute in planning for their own financial and retirement security.

Even before enduring furloughs, income shocks, and job losses during the pandemic, millennial and Gen Z adults lagged behind in retirement savings – a concerning finding given their need to start saving early to account for these cohorts’ longer life expectancy. Only one-third of Millennials and 7 percent of Gen Z reported having a retirement account, pre-pandemic. Even fewer—16 percent of millennials and 5 percent of Gen Z owned a brokerage account for investing.

The shortfall in retirement savings for young adults is due to several factors: crippling student loans, credit card debt, an uneven job market, stagnant wage growth, and rapidly rising housing costs. The picture has deteriorated since the pandemic hit: many either lost jobs or had hours reduced, and not surprisingly, 25 percent of Gen Z adults (ages 18-23) and 35 percent of millennials (ages 24-39) reported having either spent their savings or delayed saving or paying off debt.  During the pandemic, many young adults have also delayed important life events such as marriage and home purchase that frequently prompt young adults to develop a financial plan.

So, why do we claim Millennials and Gen Z are resilient?  Just like older Americans, young adults have encountered significant storms in their early lives. Nevertheless, they have persevered, many choosing contingent or ‘non-traditional work’ as bloggers and gig workers, both due to the highly competitive job market and also to their own preferences to work for companies that reflect their own values. Choosing non-traditional work, however, comes with trade-offs: lack of access to employer healthcare benefits, retirement savings plans, income security, and training.  According to government data for 2017, fewer than one-third of contingent workers were eligible for employer-sponsored retirement plans, thus forgoing employer matching contributions, auto-savings features (automatic enrollment and default contribution and investments), and more recently, student loan payment matching contributions.

It is no surprise, therefore that a result of the pandemic, nearly half of young adults report feeling a stronger commitment to their current jobs, employers, and careers. Additionally, employee benefits and other workplace perks are viewed as more important than ever (62%).

The pandemic experience has also caused young adults to commit to getting their own financial houses in order, with Gen Z and younger Millennials reporting paying down debt as a priority. Forty-seven percent of older millennials reported saving for retirement as a top goal, although building an emergency fund and debt reduction followed close behind.  Young adults recognize that now is the time to act on their intentions, develop a financial plan to pay down debt, budget, and build retirement savings.

As the Millennials and Gen Z cohorts walk down this path, they will have the opportunity to improve their own financial standing and also that of their parents, on whom they often rely for financial support. The lack of retirement readiness of Baby Boomers is well documented, yet it does not stop them from continuing to provide some form of financial support to their adult children. Over half of the young adults surveyed (57%) reported receiving some form of financial help from their parents, with one-quarter of the oldest Millennials (age 35–39) receiving help with day-to-day expenses.

The Georgetown report also reveals a surprising lack of awareness of Millennial and Gen Z adults of their parents’ precarious financial states, as well as the financial burden adult children may need to assume as a result of future caregiving responsibilities. Fewer than 20 percent of young adults anticipate that parental need for financial or caregiving support will impact their own finances or job situations. Even fewer (16%) believe that their parents are likely to outlive their retirement savings.

Such overestimation by Gen Z and Millennials of their parents’ positive financial situations deserves special attention. Intergenerational family conversations are needed in order to explore how financial support of adult children will affect parents’ retirement security, as well as how parents’ future financial needs will influence their adult children’s retirement security.

Thus far, young adults have shown themselves to be financially resilient. Their pandemic and pre-pandemic experiences have prompted them to commit to improving their short- and long- term financial futures. Moreover, increased longevity and expected longer working lives give young adults time to get on track and make up for insufficient retirement savings. But increased awareness of their parents’ potential financial support needs will help Millennials and Gen Z instill in their own children the importance of budgeting, managing debt, saving, and supporting themselves. This will be needed so they can avoid endangering their own and their children’s retirement security.

The Georgetown report, made possible with support from Bank of America and Transamerica, was based on surveys conducted in mid-July 2020 among 2,280 young adults. The nationally representative results were released November 17, 2020.


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