Average Americans Spends One-Third Of Their Paycheck On The Same Day They Receive It

Many Americans spend one-third of their entire paycheck within the first 12 hours of receiving it, according to a Talker Research study, which also cast light on where all of that money goes. Here's what happens to the typical paycheck.

Essentials Get Most Of Your Paycheck

Talker Research surveyed 2,000 employed Americans on behalf of EarnIn, and more than half of the survey's respondents quickly use their paycheck for groceries and other necessities. Those are the key items, but after covering the essentials, almost half of people turn their focus toward paying bills that are due within the week, and millennials were the biggest spenders of them all. Big obligations like housing and credit cards are also near the top of the list for 42% of Americans.

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With paychecks being spread thin, it's no wonder some people have a difficult time saving money for retirement. Only 28% of people put money into their savings or investments right away, according to the survey. It's more common for people to quickly spend their paycheck on necessities and bills, without much left for building a nest egg.

Almost 40% of millennials plan out their spending in advance and align key expenses with their paydays. More than 30% of Gen X follows the same approach. Even with all of this planning, many people overspend. More than half of Gen Z overspends, and almost half of millennials do the same, according to the survey. Societal pressure plays a role, as 18% of Gen Z says that they spend money to keep up with friends who earn more, according to the survey.

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Boomers Are In The Best Position

It may not surprise people that boomers are in the best financial position among the generations. Boomers have had more time to climb the corporate ladder, and many of them are empty nesters who have made significant progress in paying off their mortgages. They also took out mortgages when homes were much cheaper, giving them a bit of a hedge against inflation.

That's part of the reason why the average boomer has only spent $27 on overdraft fees over the past months, compared to $275 for Gen Z, according to the survey. Furthermore, less than 20% of boomers say they feel strapped for cash, while the number goes up to 54% and 43% for Gen Z and millennials, respectively.

Most of the survey participants did not know about earned wage access, a payment model that lets employees receive a portion of their wages earlier than payday. Only 15% of respondents knew about it, and out of those respondents, a little less than half have used earned wage access.

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Daily Payments Can Alleviate The Pain

After presenting the findings, Talker Research identified some solutions that can alleviate the financial stress that affected 73% of respondents. While earned wage access was mentioned, daily payments were another solution that came up.

"Sixty-two percent of these respondents say being paid daily or as they work would improve their financial wellness and decrease their stress levels by an average of 57%," Talker Research said.

"Traditional lump-sum paydays can leave people feeling flush at first but stretched thin later. More frequent access to earnings helps workers pace their spending, budget more effectively, and prepare for the unexpected – all without taking on debt," an EarnIn spokesperson said.

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