More than 75% of Americans fear a recession will happen within the next two years, with 44% of Generation Z thinking it will happen by the end of 2022.*
62% of Americans would invest in stocks during a recession, and 49% said they would invest in crypto.
Americans say they became more financially conscious in the last year due to COVID-19 (61%) and inflation (47%).
YouTube was the top choice for recession education and preparation for over half of all respondents (56%).
Bracing for the Next Economic Downturn
With the Great Recession of 2008 barely in the rearview mirror, many people remember it as the harshest economic downturn since the Great Depression. Today, with pandemic recovery, the invasion of Ukraine, and rising inflation, many people are worried there might be another recession on the horizon. To brace themselves people are taking actions to shore up their finances.
We recently surveyed over 1,000 Americans* to learn more about how prepared they are to face another recession. They shared their greatest recession fears, best investment strategies, and biggest motivations to act swiftly and smartly with their finances. Older generations also imparted some sage advice, and we’ve noted the top resources Americans use to educate themselves on financial planning. Read on to learn more about how Americans devise plans to keep their money safe and their futures secure.
There’s a looming sense of fear among some Americans that a recession might be right around the corner. How many people think one will come to fruition within the next couple of years or by this year’s end? Let’s look at their predictions and what each generation fears the most.
More than three-quarters of Americans are bracing for a potential recession within the next two years. Most people think that it’ll happen sooner rather than later. They aren’t alone in this fear, as most economists and investors agree a recession will likely hit the U.S. in 2023.
There’s no discernible age group among the generations that is more or less worried than another about an upcoming recession. Although, Gen Z was slightly more likely to think one would happen this year. The scariest aspect of a recession for the youngest Americans was that they might lose their jobs. Millennials and Gen Xers most feared getting behind on their bills and being unable to pay them. Baby boomers’ biggest worry was needing to withdraw funds from their retirement savings.
Despite the consensus of a looming recession, respondents are still planning to make financial investments in the stock market, real estate, and cryptocurrency. More than half of respondents (52%) said they would use a recession to their advantage and buy their first home. Gen Zers (64%) and millennials (55%) were the most likely to say they would do so. While self-managing your investments is common, a professional financial advisor can help guide you through investment options and decisions.
Financial Lessons: Pandemic Edition
The financial impact of recessions can be devastating — how many Americans are financially ready to deal with another one? Here’s a look at who’s financially secure and how much they’ve saved to feel this way.
Nearly half of respondents felt financially secure enough to survive another recession. On average, Americans have saved $7,586 for an emergency. Gen Zers felt safest, while millennials were the shakiest. Interestingly, Gen Z had the least amount saved ($5,817). Baby boomers had the most emergency savings ($9,337).
The global pandemic caused many to be more financially conscious of their spending habits in the last year due to the COVID-19 pandemic (61%) and inflation (47%).
Making a concerted effort to increase savings, contributing to an emergency fund, and learning how to budget more effectively were the top lessons learned from the pandemic. People who were given financial advice throughout the pandemic were more likely to experience a positive financial impact. This help came from their workplace, a dedicated financial advisor, or online money management tools.
Recession-Related Words of Wisdom
What suggestions can older generations (baby boomers and Gen X) give younger Americans (Gen Z and millennials) to put them in the best position to succeed financially?
From Gen Xers and Baby Boomers to younger generations, the biggest piece of advice they hit home was to increase savings and learn how to budget. Millennials and Gen Zers have taken the “increase my savings” suggestion to heart but prioritized maintaining a stable job more than taking a budgeting crash course.
Among all the generations, YouTube was one of the top three resources for recession preparation/education purposes and the first stop for everyone but baby boomers. Perhaps its accessibility and the fact that it’s free is what made YouTube the top choice across all generations.
Meanwhile, Millennials and Baby Boomers used financial service companies for recession preparation and education. Working with a financial advisor proved a major success: 78% of Americans reported feeling more financially secure and prepared for whatever lies ahead because of their advisor’s help.
If you’re interested in speaking with a financial planner for the first time or looking for a switch, it’s important to find the right match. Ask potential advisors about their qualifications and experience working with clientele in relatable stages of their financial journey, share your money goals and ask how they can help. The answers to these questions, and more, can set the stage for advice tailored to your specific needs.
This article was originally published July 18, 2022.
MethodologyPersonal Capital commissioned a Fractl survey of 1,002 Americans about their financial habits and how they’re preparing for a recession. 16% of respondents were Generation Z, 48% were Millennials, 25% Generation X, and 11% were Baby Boomers. The survey was conducted in May, 2022.For short, open-ended questions, outliers were removed. Survey data has certain limitations related to self-reporting. These limitations include telescoping, exaggeration, and selective memory. The margin of error was 3%, with a confidence level of 95%.
About Personal CapitalPersonal Capital is a digital wealth management company that helps people transform their lives through technology and personalized advice. The company’s free technology provides consumers with a holistic financial picture and is used by 3.3 million people to track $1.4 trillion in account assets (as of 5/31/22). Its wealth management advisors provide expert guidance, and customized strategies, based on a personal understanding of an investor’s financial picture and goals. For more information, visit personalcapital.com.
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