Young Americans Struggle to Save, Raising Concerns Among Financial Experts

Teens check their phones at Roosevelt Field mall in Garden City, N.Y., on July 27, 2015. Seth Wenig/AP Photo

Financial experts are increasingly concerned about studies showing that young adults in the United States are falling behind in savings at an alarming rate. Some organizations are working to promote financial literacy and encourage better saving habits.

The latest survey by financial services company Empower found that more than 21 percent of Americans lack emergency savings—funds set aside for unexpected expenses such as medical bills, job loss, or other financial emergencies.

According to the survey, the median emergency savings among Americans is just $600—far below the recommended amount to cover three to six months of expenses.

Baby boomers (ages 61 to 79) and Gen Xers (ages 44 to 60) have saved the most, with median savings of $1,000 and $868, respectively, while millennials (ages 28 to 43) and Gen Zers (ages 13 to 28) have saved the least, with medians of $500 and $200.

The report cites high monthly expenses and economic challenges as the main factors affecting Americans’ ability to save. Additionally, high credit card balances hinder their ability to save for emergencies.

While many young adults struggle to build emergency savings, some are also allocating a significant portion of their income to discretionary spending.

A new study by American business intelligence company Morning Consult shows that a large percentage of Gen Z adults are outpacing other generations on discretionary spending.

According to the study, discretionary spending accounts for 23 percent of Gen Z adults’ expenses, with 61 percent admitting to overshopping—many even accumulating debt over “feel-good” purchases.

“It’s impossible to save enough, so they don’t start,” William Hubbard, chartered financial analyst and CEO of Cirrus Capital in Michigan, told The Epoch Times.

At the same time, easy transaction apps have made it harder for young adults to save, according to Thomas Rudzewick, president of Queens, New York-based community bank Maspeth Federal Savings.

“The problem is that young people today have so many opportunities to spend money because their phone is the banking transaction center,” he told The Epoch Times. “The ease of digital transactions today isn’t giving young people the ability to save.”

This lack of savings discipline extends beyond emergency funds—financial experts warn it could have long-term consequences for retirement security.

A year-end 2023 YouGov poll found that more than 60 percent of Gen Z Americans and millennials either have no savings for retirement or have saved less than $5,000, and 43 percent of adults are unconfident about their retirement provisions.

“This mindset is preventing them from meeting future retirement needs. Parents should teach their kids smart financial habits they wish they had known earlier,” Hubbard said.

“These findings indicate a significant gap in financial literacy,” Jake Falcon, chartered retirement planning counsellor and CEO of Falcon Wealth Advisors in Kansas, told The Epoch Times.

“Many young people may not fully understand the importance of early retirement savings or the power of compound interest, which can lead to delayed saving and inadequate preparation for retirement.”

Michael Ashley Schulman, partner and chief investment officer at the multifamily office Running Point Capital Advisors in Newport Beach, California, told The Epoch Times that the surveys “serve as a good reminder for women and men to start saving sooner rather than later in order to benefit from the opportunity for long-term investment-return compounding.”

Another major hurdle young adults face is student debt, which can significantly hinder their ability to save for the future.

Last year, educationdata.org determined that 13.1 million Gen Z and 18.5 million millennials have student loan debt, but at $44,240, Generation X has the highest average student loan balance followed by millennials with $40,438, and Gen Z with $22,948.

Maspeth Federal Savings is using a three-pronged approach to help avert a retirement crisis by facilitating a shift in financial mindset and empowerment among students at local schools and colleges.

The bank’s Financial Literacy Program was launched three years ago by Rudzewick at his alma mater St. Francis Prep in Fresh Meadows, Queens.

“I sat down and did a financial literacy session completely off the cuff with a couple of my team leaders just talking about how you have to start saving early,” Rudzewick said. “That’s grown into a great program with 10 bankers.”

Actionable steps include creating a budget. Without one, financial ruin looms large, according to Rudzewick.

“They'll become saddled with debt that they cannot recover from,” he said. “Student loans are a very frightening prospect. I try to talk to students about what they’re about to embark on when we teach financial literacy at the university level.”

While student loans are a significant financial burden, another pressing issue is encouraging workers to take advantage of employer-sponsored retirement plans.

“Starting to save within a 401(k) tends to be an indicator amongst Millennials and Gen Z of someone having their act together,” Schulman added.

A The Century Foundation (TCF) study found that 43 percent of full-time working Americans do not participate in a 401(k) plan, and as a result, the stakes are high, according to Falcon.

“Many individuals may find themselves financially unprepared for retirement, leading to increased reliance on social safety nets and potential financial strain on families and communities,” Falcon said. “The quality of life for retirees could be significantly impacted, with many facing financial insecurity and limited resources to cover essential expenses.”