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Why people are saving less — and which generation saves the most

Gen Z, millennials, Gen X and the baby boomers all have their differences, but which generation is best at saving money?

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Glass jar with coins on table.

A glass jar with coins on table.

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Roughly 75% of American workers earning up to $50,000, and 65% of those earning between $50,000 and $100,000, live paycheck to paycheck, per CNBC.

Further, Americans’ credit card debt passed $1 trillion in 2022, rising $250 billion in the last two years, according to The Hill. Interest rates on credit cards are typically around 20%, making it even more difficult for those with debt to save.

These factors influence everyone regardless of age, gender or ethnicity, but trends have shown the rate people save money varies between generations.

Statistically broken down into generations, Gen Z (ages 18-25) saves an average of 14% while millennials (26-42), Gen Xers (43-55) and baby boomers (56-75) save an average of 12%, per CNBC.

This difference is likely a result of three causes.

1. Gen Z watched the 2007-2009 recession as kids

As 12-year-olds and younger, Gen Z watched their parents and older siblings get hit with job loss, home foreclosures, bankruptcy and debt during the Great Recession. According to the Bureau of Labor Statistics, there were some discrepancies between demographics of the unemployed — however, the recession influenced everyone. Thus, while some groups were hit harder than others, financial instability and distrust was the general atmosphere Gen Z experienced during their formative years.

Taken just a couple years after the recession, Gen Z’s inclination to save was seen in a 2014 study by TD Ameritrade Holding Corporation, saying 84% of respondents would save if $500 were randomly given to them. Broken down, 47% said they would save for “nothing in particular” while “34% said they would save it for college.”

2. Lack of trust in Social Security

Due to a steady increase of retirees and decrease of workers contributing to retirement benefits, NPR reported that some reports have predicted Social Security funds to be depleted by 2033. In a speech given earlier this year, President Joe Biden said, “I will not cut a single Social Security or Medicare benefit. In fact, I’m going to extend the Medicare trust fund for at least two decades. And we’ll not raise taxes on anyone making over 400,000 grand. And I’ll pay for it all, my proposals, by making the wealthy and big corporations pay just a little bit more.”

Though Biden has promised to not cut Social Security or Medicare, a plan has not yet been presented on how to sustain Social Security.

Further, by the predicted end of Social Security, the oldest members of Gen Z will only be 36, and the youngest will be 21.

3. Inclination to invest

Compared to Gen X and the baby boomers, Gen Z primarily invests in cryptocurrency and is the least likely to invest in mutual funds, per a report done by the CFA Institute. Additionally, Gen Z began investing earlier than any other generation, with 25% beginning to invest before turning 18. This early age is likely due to comfortability with technology, easy access to information, and a desire to be more proactive while growing wealth.

According to CNBC, staying focused on saving not only ensures stability later in life, but has been proven to improve mental health and increase happiness.