60% of Gen Z Don’t Have an Emergency Cash Fund — A Strategic Opportunity for Credit Card Issuers

Sixty percent of members of Generation Z are unlikely to have cash set aside for emergency expenses, according to a new study from Credit One Bank.

The decision by members of Gen Z to forgo building a rainy day cash fund represents an opportunity for credit card issuers to entice consumers in that demographic to apply for a credit card they can access when unexpected costs arise.

The study highlighted a key difference in emergency savings strategies among generations. While nearly two-thirds of baby boomers with cash or debit cards reported keeping a cash reserve specifically for unplanned expenses, only 38% of members of Gen Z reported doing the same.

Generation Z members, born between 1997 and 2012, represent one of the most important consumer demographics with spending power of about $360 billion — and growing.

A recent report indicated that Gen Z accounts for 40% of the worldwide consumer market and “wields tremendous influence over every other generation, across not just what we buy, but how we live and what we believe.”

Steve Min, Credit One Bank’s Chief Credit Officer, said in the press release that data the bank gathered suggests a shift in how Americans prepare for unexpected costs.

“While older generations have long viewed cash as their primary safety net, younger consumers are increasingly turning to credit lines to bridge gaps in their emergency planning,” Min said.

“We believe in empowering all cardmembers with the tools and guidance they need to build a balanced financial strategy: from growing cash reserves to responsibly managing credit,” he continued.

Credit card issuers looking for a strategy to attract members of Gen Z may have one in positioning their card as a tool that allows consumers to withstand financial emergencies. 

We sat down with Charlie Wise, Senior Vice President and Head of Global Research and Consulting at TransUnion, to discuss the importance of having access to savings and credit when it’s most needed. Wise told us that it’s always a good idea for consumers to have a financial safety net to cover expenses for three to six months.

Fewer than one-fourth of U.S. cardholders own a credit card they reserve for financial emergencies, according to Credit One Bank.

“If you have a major unexpected expense, such as your car breaking down or a medical emergency, then you need to be able to get your hands on cash so you’re not in desperation mode,” Wise said. “And make sure that you have access to credit on your credit cards and personal loans.”

The Credit One Bank study indicated that only 24% of cardholders in the U.S. have a credit card solely designated for emergency expenses. 

Issuers have an opportunity to educate cardholders of all ages about using a credit card for emergency expenses and the importance of responsible card use. By doing so, they stand to attract new customers and build goodwill among current ones.