Nearly half of millennials who paused their lives during the pandemic saved $4,000

Millennial
Some millennials were finally able to save during the pandemic. Luis Alvarez/Getty Images
  • 61% of millennials experienced “paused costs” during the pandemic, per a New York Life survey.
  • They had fewer overhead expenses and everyday costs, from student debt to eating out.
  • 48% of this group built an average nest egg of $US4,241 ($AU5,620). It’s helped them drive the economic recovery.

For some millennials, the pandemic was a good time to build a little wealth.

Sixty-one percent of the generation paused their costs when the economy shut down last year, according to a new survey from New York Life Insurance that polled 2,300 American adults. A reprieve on student loans, the chance to forgo a lease in favor of temporarily moving home with parents, and the lack of everyday expenses like gym memberships and eating out enabled nearly half of this cohort (48%) to create an average nest egg of $US4,241 ($AU5,620).

But this group of savers only accounts for one-third (29%) of all millennial respondents, including those who didn’t experience paused costs. The difference is emblematic of a millennial wealth gap that intensified during the pandemic, in which the millennial rich and millennial poor have been recovering at different paces.

“This pandemic is widening economic inequalities within millennials, with some millennials relatively unscathed economically and others just completely financially devastated by unemployment losses, increased childcare costs, lost economic opportunities, and lingering health problems that they or family members are going to experience,” Christine Percheski, demographer and associate professor of sociology at Northwestern University, told Insider earlier this year.

Millennials were already facing an affordability crisis pre-pandemic, marked by the fallout of the Great Recession, astronomical student debt loads, and soaring living costs. It all left them with little wealth to fall back on as they experienced unemployment and other hardships during the coronavirus recession. Percheski said this group likely burned through whatever savings they had.

But then there’s a smaller group of wealthier millennials that stayed employed, able to spend less disposable income and build up their savings. Two financial advisers told Insider last June after the initial economic shutdown, that clients of this ilk were tucking away excess cash, as much as $US3,000 ($AU3,976) a month in some cases, that normally would’ve been spent on brunches or plane tickets.

Millennials’ savings are good for them and for the economy

While this group of wealthier millennials is “a smaller part of the story,” as Percheski puts it, they’ve also been a big force in driving the economic recovery this year. After a vaccine rollout and lifting of restrictions, the economy needed people to spend to propel it forward. As UBS strategist Keith Parker wrote in a note earlier this year, higher-income households are “key to driving the recovery in consumption,” which makes up 70% of the US economy.

Higher-income millennials just so happened to be that key. They were planning to spend the most during the economic reopening, according to a report by McKinsey & Company from the second quarter. This cohort has since been spending big on travel, dining out, and new homes, helping to inject much needed money into the economy. Such spending was especially needed after the highly contagious Delta variant threatened this year’s economic progress.

But not all millennials who saved during the pandemic are intent to shop till they drop.

Gideon Drucker, a certified financial planner at Drucker Wealth who works with high-earning millennials, previously told Insider that the savings habits his clients picked up during the pandemic have steered them in the right direction as we slowly return to normalcy. “Being able to see themselves save money and track their net worth according to a clear game plan has motivated them to keep it up and stay the course even as the world has opened up,” he said.

Even if clients are spending a bit more now, he added, they’re just saving a bit less in the short term, rather than stopping completely. They’re also keen to manage their money better: More than half of millennials in the New York Life survey said their nest egg savings made them more likely to consider getting help from a financial professional, compared to just 33% of all adults.

It’s a sign that for however much the generation is spending, they’re also interested in saving. It could be the leg up they sorely needed to catch up in creating long-term wealth.