55% of millennials, Gen Zers aren't prioritizing saving—and that may actually be smart, expert says

If you're thinking that every 20-something you know on Instagram is splurging on transatlantic vacations these days, you might be right.

That's according to a recently published survey from financial services company Fidelity, which polled 2,622 adults in mid-February on their retirement planning habits. The survey found that 55% of 18- to 35-year-olds have halted their retirement planning since Covid hit, and 45% of that age group "don't see a point in saving until things return to normal."

"In the last two years, some people had more cash because they weren't going out, they weren't going on vacation," Rita Assaf, Fidelity's vice president of retirement products, tells CNBC Make It. "But especially with the market being choppy and [high] inflation, I think this group is just thinking, 'Why should I build up a retirement plan right now?'"

The trend is partially due to a high cost of living for young people in America right now: student debt, rising housing demand and 8.6% inflation weigh on people's minds and wallets, Assaf says.

For instance, if you don't want to put money into an unpredictable market, you might want to wait until the market stabilizes – even if billionaires like like Warren Buffett and Elon Musk recommend against that practice. And if you're concerned about inflation outpacing your savings rates, you might be more inclined to spend.

In February, a Bankrate survey observed that 54% of younger millennials and 46% of Gen Z respondents said their emergency savings had declined since 2020. The survey also revealed that millennials were more likely than other generations to have higher credit card debts than savings balances.

The Fidelity survey notes that the decision to halt saving is likely a temporary one: 39% of those 18- to 35-year-olds expect to retire later than they did pre-Covid, related to their decisions to delay their saving plans by a couple of years.

In other words, at least some young people now plan to work extra years at the end of their careers, to pay off the financial pain they're incurring during the pandemic. "This generation is way more aware than previous generations were at their age," Assaf says. "Younger investors are seeing the lessons learned from those prior generations, and want to be more in charge [of their money]."

Assaf credits financial literacy tips on social media, along with earlier exposure to workplace retirement plans, to the "more active approach" to financial wellness that today's young people – especially young women – are taking. She also notes that the survey results show a "general sense of optimism" – if not for now, then for the future.

"Of our general population, 65% said 2022 was the year they put the pandemic behind them ... That number rose to 74% when we just looked at the younger generation," Assaf says. "It makes sense: They have a longer time horizon, and they're thinking, 'I have the pandemic behind me, and I'm ready to focus on the future.'"

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