There has been plenty of pandemic-induced financial stress to go around for practically every employee nationwide in the past year-and-a-half, but a new survey reveals that the impact on younger workers has been the most dramatic.
An annual nationwide survey of 401(k) plan participants from Schwab Retirement Plan Services found that a large proportion–44% and 38%, respectively–of Generation Z workers and millennials reported that financial stress affected their ability to do their jobs this past year (compared to 24% of all workers surveyed). The survey drew responses from about 1,000 employees at companies with at least 25 workers who were 401(k) plan participants and between ages 21-70. Schwab defined Generation Z as 21-24, millennials 25-40, Gen X 41-56 and Baby Boomers 57-70.
In related findings, around one-third of those younger 401(k) plan participants already predict that their retirement will be delayed because of COVID-19, compared to one-fifth of their Gen X co-workers, who still have one to two decades before they hit 65.
“Gen Z workers are just starting their careers at a time of upheaval at home and in the workplace–from new health and safety challenges to the rapid expansion of virtual offices and dramatic swings in our economy and markets,” says Catherine Golladay, head of Schwab Workplace Financial Services. “It’s a stressful environment, and young people are looking to their employers for support. The labor market is tight, and companies have an opportunity to attract and retain talent by providing tools and resources that help workers manage their money.”
The Schwab survey also found that employers that have done a good job managing the impact of COVID-19 on employees can enhance retention, with around a quarter of Gen Z workers and a third of millennials reporting that their employer loyalty has increased in relation to how their employer handled COVID-19.
Employers also should take note that, while Gen Z participants in particular are troubled by recent financial challenges and uncertain about retirement, they are willing to embrace employer-driven advice on how to manage their financial lives, now and in the future.
A solid 62% of Gen Z participants said their financial situation warrants advice from a professional. Compared to older generations, Gen Z is more open to fielding assistance from both in-person professionals and tech-enabled financial wellness solutions. In particular, one-third of this younger cohort is very likely to follow computer-generated advice versus one-quarter of respondents from other generations, while 60% of Gen Z participants are very likely to follow financial advice from a human compared to 54% of other generations.
Plus, 30% of Gen Z participants want help managing their current expenses so that they can save more money for retirement (versus 22% for all other participants), and 29% want help managing their debt (compared to 15% for all others). They are also interested in understanding their general financial wellness, with nearly half welcoming online assessment tools that can give them an overall financial picture and action plan.
Across generations, while 401(k) plans continue to be a welcomed benefit for workers of all ages, 31% of Gen Z participants feel they are not on top of their savings plan (versus 23% for older participants), and 51% agree they don’t know what investments to choose for their 401(k) to have enough for retirement, compared to just 32% of older participants.
“When it comes to personal finances, Gen Z workers are mature for their age,” Golladay notes. “They are clear-eyed about the challenges they face, looking for more tools to manage their finances and optimistic that the right resources will help them improve their financial behavior.”