It’s clear the pandemic has and will continue to have profound effects on individuals’ finances and the nation’s economy.
New data reveals in more detail just how the last two years have opened new economic doors and created new financial challenges for the nation’s largest living generation, millennials, and their younger Gen Z counterparts.
A recent Bank of America and Georgetown University study, Gen Z & Millennials: A Perfect Storm, surveyed millennials on their financial perspectives once in 2020 and again in 2021 to see how the ongoing pandemic changed their viewpoints. The results overall indicate that financial well-being among younger generations fell further behind during the pandemic.
“You would have hoped some of their attitudes in fall 2021 would have shifted to be more positive,” says Kevin Crain, head of retirement research and insights at Bank of America. “But they felt, generally, in their financial condition more stressed than they did in 2020.”
Millennials Made Little Progress Toward Financial Goals During the Pandemic
Millennials described their financial goals in 2020 as being a mix of saving for retirement, building an emergency fund and buying a home. But when surveyed again in 2021, many hadn’t taken any steps toward reaching those goals.
In the 2020 survey, 43% of millennials said saving for retirement was a top financial goal, but by 2021, only 30% had taken steps toward that goal in the last year. The gap between goals and action was even wider for those who cited buying a home as a top financial priority: In 2020, 37% listed saving for or buying a home as a financial goal, but by 2021, only 21% report taking steps toward that goal.
A year or two without progress toward one’s financial goals doesn’t mean those goals won’t ever be met, but for younger generations, a delay of a few years can mean crucial time lost when it comes to owning financial assets that can grow in value, like a home or 401(k).
Young People Are More Worried About Finances
Survey results indicate millennials are more concerned about their money lasting, more likely to be living paycheck to paycheck, less likely to be able to handle a major financial expense and more likely to report they are just getting by financially in 2021 compared to 2020.
Zechariah Schaefer, founder of Ascent, a financial planning firm that serves millennial and Gen Z clients, describes an intense focus among younger clients toward reaching their financial goals that leads to significant financial anxiety.
“If you think about someone who is so focused on their destination and so anxious about getting there that they won’t even stop for a water break or stop to eat, that’s where some millennials and Gen Z are,” Schaefer says. “They see the disparity, that in the ’70s and ’80s a home cost 1.5 times the median salary and now it’s 6 times or 7 times or more. … But lots of times, it’s more attainable than they think.”
The Pandemic’s Affect on Millennial Finances Was Uneven
Survey results indicate financial outlooks and priorities vary across genders and ethnicities.
Male millennials and millennials who identify as part of a racial minority report more positive outlooks for their financial futures than do their female and white counterparts. For example, 43% of males agreed with the statement that they will have a better life than their parents, while 34% of females agreed. In answering the same question, 52% of Black respondents and 47% of Hispanic respondents said they would have a better life than their parents, while 34% of white respondents agreed.
“Asians are feeling a greater level of financial security and there were a number of areas in the survey where that came out,” Crain says. “But Black African Americans and Hispanics being more optimistic about their future and their future life and what it’s going to be like than I probably would have seen in other previous studies we’ve done on those topics, I found that interesting.”
Younger Generations Can’t or Don’t Tend to Access Professional Financial Help
Gen Z and millennials have an incredible amount of financial resources at their fingertips through online sources, so it may be no surprise that when asked about their sources of financial advice, 36% of millennials cited online resources and only 16% cited professional financial advisors with the most popular source for financial advice being close family.
These generations have had more access to financial education than any generation prior,” says Haley Tolitsky, a certified financial planner at Cooke Capital in Wilmington, North Carolina. “You can become a millionaire by Googling research strategies for investing. You can open a Roth IRA on your phone in two minutes on an app. We have all of these great resources, but this can provide information overload. That’s where financial planners can provide a lot of value.”