When it rains, it pours.
That’s the motto for 2020 alright. Grab an umbrella and let’s splash into it. Early annual enrollment data from employees who enrolled in their benefits this spring and summer in comparison to last fall indicate some interesting findings about how (and which) employees are saving for an unexpected expense. Surprisingly, older generation’s financial boats are sinking while younger generations are yachting it.
Who has the pail and who has the dockers?
Gen X and Boomers are bailing, and Gen Z and Millennials are rocking the nautical themed ascots. Well, maybe not that extra. But the data shows that Gen Z and Millennials were able to put more money away mid-COVID while Gen X and Boomers lost some ground.
Well, it seems like Gen Z (being the overachievers that they are) are taking the money that might have gone to dinners out or movies (remember those!) and using that money to pad their health care savings accounts. Instead, some of us are choosing to invest in something more boozy.
And what about X and Boomers?
That answer is a little trickier. It may be that with the financial downturn, many Boomers and Gen Xers are supporting their younger (or older, or both) family members. This could be depleting their savings or lowering how much they put away each month.
Yes. In contrast to the 4% during last fall’s annual enrollment, 14% of Gen Z employees enrolling mid-year reported they were prepared for a large, unexpected cost. That’s a 250% increase! In contrast, Boomer employees dropped almost 30% when it came to money in their rainy-day fund.
Rain drops keep falling…
On all our heads. But there is some positive news when it comes to saving. The rate of saving among both women and men increased significantly, with women showing a 56% improvement in saving mid-COVID vs. pre-COVID.
Bring on the rainbows!
Not so fast. Although this positive savings trend is something to feel good about, there’s still a financial dumpster fire to contend with. Fifty-two percent of employees indicated they are concerned about their financial well-being in the face of COVID-19. While employees are saving more, their level of saving has not yet caught up with their potential need both in terms of out-of-pocket health care costs or an unexpected emergency. Especially with older generations - the sandwich generation (Gen X) is getting hammered since they have to care for (and pay for) both children and aging parents.
More than 40% of Americans admit financial stress make it difficult for them to concentrate at work.
A financier’s take:
“The paradox is that if everyone across the broad economy is hunkering down, that only makes the recession worse. The paradox of thrift is a negative feedback loop. The more people save, the less they spend; the less they spend, the worse the recession gets; the worse the recession gets the more they save.” – Marc Odo, portfolio manager at Swan Global Investments
2020 MyChoice Recommendation Engine Special Financial Report