The pandemic ate young adults' savings, widening the gap between the Gen Z and millennial haves and have-nots

Gen Z and millennials experienced the most job loss, drawing from their savings to survive. Meanwhile, their wealthier peers tucked away excess cash.

• Gen Z and millennials' savings accounts were hardest hit during the pandemic.
• Young adults experienced the most job loss, since many worked in service industries.
• Many had to draw from their savings to survive, while their wealthier peers tucked away excess cash.

Young adults' savings accounts were hit hardest during the pandemic. 

So finds a Bankrate survey that polled 1,000 Americans. Nearly half of Gen Z (46%) and nearly half of millennials (43%) said they currently have less emergency savings than they did before the pandemic. That's more than the 34% of overall respondents who have less emergency savings now.

Twenty-two percent of both millennials and Gen Z said they had about the same amount saved, while 28% of Gen Z and 31% of millennials said they have more saved.

The findings are reflective of the toll the pandemic took on younger workers, who suffered the most from job loss. Unemployment data from the St. Louis Fed in July 2020 showed that both Gen Z and millennials were worst affected in terms of unemployment. They were most likely to say in several surveys around that time that they lost jobs or that their incomes suffered. 

Recessions typically hit young adults hardest in the short term, but the cohort was even more susceptible due to the nature of a global health crisis that slammed service industries. As Bruce McClary, senior vice president for membership and communications at the National Foundation for Credit Counseling (NFCC), told Bankrate, many young adults work in the travel, food and beverage, and hospitality sectors, which were all impacted when the economy shut down. While many have since recovered their jobs, its financial impact could have longer-term repercussions.

With no income to rely on, young adults couldn't add to their savings and likely had to withdraw from them to cover living costs. As Christine Percheski, demographer and associate professor of sociology at Northwestern University, previously told Insider, "I would imagine a lot of people are burning through whatever savings they had as they experienced unemployment."

A growing wealth gap

That some young adults were still able to save more emphasizes how the pandemic has widened inequality, especially among millennials. Their wealth gap dates back to the Great Recession, which left many millennials struggling to build wealth as they tried to find a job in a weak labor market. However, those able to land a steady income or with family support remained relatively unaffected, able to gain a foothold in their career and finances. 

The affordability crisis created by high housing costs, student debt, and stagnant wages already faced millennials pre-pandemic. While a smaller, higher-earning group with stable income has been able to save, invest, and even buy homes with extra money they would otherwise spend on travel and social lives in non-pandemic times.

"There's a group of wealthier millennials that probably have spent less of their disposable income than they would in non-COVID times and may actually have built up some savings during this," Percheski said.

Consider the millennials raking in over $100,000 annually. Two financial advisers told Insider that clients of this ilk were tucking away excess cash during the summer of 2020, as much as $3,000 in some cases, that normally would've been spent on brunches or plane tickets. 

While most of Gen Z isn't in the workforce, those that are also experience a deep wealth divide. Some college graduates are having the toughest time finding work, squeezed out by teens that cost less to hire and more skilled millennials. But other Gen Zers are bouncing back, quitting their jobs for a better one and demanding more work-life balance. 

With many young adults still feeling a hole in their pockets from job loss, the effects of the coronavirus recession's K-shaped recovery are still lingering.