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Generation Zerssaves costs.
More than half, 53%, say the high cost of living is a barrier to their financial successnew research from Bank America.
Nearly three in four young adults in the survey, 73%, have changed their spending habits amid record high inflation.
“Many of these loans are phasing out,” said AJ Barkley, head of neighborhood and community lending at Bank of America, calling the results “good news.”
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The changes they are making include cooking at home more often, by 43%; spend less on clothing, 40%; and limits shopping to the essentials, 33%.
Most plan to continue these changes in the coming year, according to the company's August survey of nearly 1,200 young adults ages 18 to 26.
Generation Z faces unique economic challenges
Yet more than a third of young Gen Zers have also faced setbacks in the past year, the survey found, which may have caused them to stop saving or take on more debt.
Generation Z faces unique financial challenges compared to older generations. University graduates earn 10% less compared to their parents,recent researchfound it.
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High inflation – and concerns about affordability among Gen Zers – extend beyond America's borders. ADeloitte-surveyreleased earlier this year and featured approximately 14,500 members of Gen Z in 44 countries found that living paycheck to paycheck was a concern cited by about half of that generation, 51%; followed by the need to take a part-time job, 46%; and cost of living, 35%.
'This is really time to lay a solid foundation'
But there is good news, according to the Bank of America research. Most respondents are confident in their ability to manage their daily expenses, budget and credit. Yet they show less confidence when it comes to saving for their pension or investing in the stock market, according to the results found.
“Now is really the time to build a solid foundation that will help you succeed for the coming decades of your financial life,” says Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York. Bonepart is also a memberCNBC Financial Advisory Board.
Experts say these three tips can help members of Generation Z manage their money wisely.
1. Make saving a habit
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According to Bank of America research, more than half of Gen Z, 56%, do not have enough emergency savings to cover three months of expenses.
It's a good idea to drain all the extra money, Boneparth said, and think about what's important to you to stay motivated.
“Make it a habit to be a consistent saver,” Boneparth said.
Putting that amount of money aside will help you continue pursuing your goals, even when life throws you surprises. “It's never a straight line,” Boneparth said.
2. Start investing for your retirement now
While retirement may seem like a distant goal, especially in the early years of your career, Barkley believes that accumulating wealth will actually give you the greatest benefit.
Any money you invest now will have more time to accumulate profits that will compound over time.
“They should be thinking about retirement now,” Barkley said.
For starters, an employer-provided 401(k) can help with these initial contributions and can even include an extra boost from a company match, if offered.
Young investors can also open an individual pension account themselves. Experts often recommend making after-tax contributions to a Roth IRA early on, because you may be prohibited from contributing to these accounts later in your career when your income is higher.
3. Resist the urge to give in to FOMO
Gen Z women are more likely to feel pressured to spend money to keep up with their social circles, Bank of America found.
Social media is a big driver of these feelings: 41% of female Gen Zers say their feeds make them wish they had more money for non-essential expenses, compared to just 24% of men.
All Gen Zers would be wise to avoid FOMO, according to Ted Jenkin, a CFP and CEO ofoXYGen Financialin Atlanta. Jenkin is also a member of the CNBC FA Council.
“Your friends aren't posting their net worth on Instagram and TikTok, so keep in mind that people may not do as well when they appear on social media,” Jenkin said.
It also doesn't hurt to avoid credit card debt and check your credit score regularly, Jenkin said.
FAQs
More than half, or 53%, of Gen Zers say higher costs are a barrier to their financial success, according to a separate survey from Bank of America. In addition to soaring food and housing expenses, millennials and Gen Z face other financial challenges their parents did not as young adults.
Why is Gen Z struggling financially? ›
Gen Z faces unique financial challenges compared to older generations. College graduates earn 10% less compared to their parents, recent research found. High inflation — and affordability concerns among Gen Zers — extend beyond U.S. borders.
Does Gen Z have a serious debt problem? ›
The generation, which comprises people born between the mid-1990s and the early 2010s, was the cohort most behind on their debt payments (for more than 90 days) and they are more delinquent on their debt bills than they've been in three years, according to the New York Fed.
Does Gen Z say they have it harder than their parents did and the economy is to blame? ›
Roughly 38% of Generation Z adults and millennials believe they face more difficulty feeling financially secure than their parents did at the same age, largely due to the economy, according to a Bankrate report.
What is Gen Z struggling with? ›
Gen Z Struggles With Mental Health
Social media, which many Gen Zers have used for most of their teenage and adult life, exacerbates these issues — no other generation has had such immediate and unfiltered access to the news for most of their lives, which can lead to stress, anxiety, and other mental health issues.
Is Gen Z financially responsible? ›
While just over half of Gen Z (52%) feel confident that they're on track to meet their financial goals, fewer than half (48%) are fully or even mostly financially independent.
Is Gen Z financially stable? ›
Gen-Z feels substantial anxiety and stress about jobs, long-term financial stability and major life steps, such as buying a home and starting a family. The current economy and job market are primary sources of uncertainty for this generation, according to EY's 2023 Gen-Z Segmentation Study.
Which generation has the highest credit card debt? ›
Americans collectively owe over $1 trillion in credit card debt. But one generation carries the most, on average: Gen X. The average credit card balance for Gen Xers, defined at those between the ages of 43 and 58, rose to $9,123 in the third quarter of 2023, according to Experian's latest available data.
What generation carries the most debt? ›
Key statistics
- People aged 40-49 hold the highest amount of debt with $4.21 trillion in total.
- By 2030, Millennials (born between 1981 to 1996) are expected to have the most total debt at an average of $228,891 per person.
One of the biggest financial concerns for Gen Z is their lack of emergency savings. The ability to save has been greatly impacted by the high cost of living and going to college, paired with the fact many Gen Zers are working at entry-level jobs. The effects of these financial concerns seep into Gen Z's wellbeing, too.
Despite the complexity of these issues, the blame for these trends has far too regularly been pointed in one direction: toward Generation Z. As the newest entrants to the workforce, Gen Zers have been frequently scapegoated — saddled with stereotypes of being disloyal, unprofessional and lazy.
Why is Gen Z giving up? ›
For starters, young workers are unimpressed by their wages. Having clocked in remotely during the pandemic, it's unsurprising that over 65% of the 2,063 Gen Zers surveyed said they were unsatisfied that the same wage is now expected to stretch to cover their meals, commute, and work-appropriate clothes.
What are the negatives of Gen Z? ›
Share:
- Gen Zers have a short attention span. ...
- Gen Zers are multitaskers. ...
- Gen Zers are addicted to technology and can't handle face-to-face interactions. ...
- Gen Zers expect too much from the brands and companies they interact with. ...
- Gen Zers want to be rewarded quickly.
Teens say bullying and addiction are major issues for their generation. Teens share many of the same biggest concerns for their generations as older Gen Z and Millennials do, but a few issues they name are unique to their age group.
Are Gen Z worried about money? ›
Less than a third of Gen Z (31%) feel financially secure, with more than half (52%) saying they are very or extremely worried about not having enough money.
What does Gen Z say about boomers? ›
Gen Z Says Boomers Will Never Understand Today's Struggle Because They Could Buy A Cadillac Off A $30K Salary. In a viral TikTok video, Robbie Scott, a 27-year-old content creator, ignited a debate surrounding the work ethic differences between baby boomers and Generation Z.
Will Gen Z be able to afford houses? ›
Despite Increasing Salaries, Gen Z and Millennials Can't Afford Houses. “This is a resilient response to the very dramatic increase in rental burden. The average proportion of a person's income that goes to rent was 25% in 2000, and it's now 40%. That's really a striking increase,” Wachter said.
Why are so many people struggling financially? ›
The US Bureau of Labor Statistics indicated that the shock to food and energy prices, supply chain issues, and an increased demand for products all contributed to the sharp rise in inflation. Fast forward four years and most Americans are still struggling.
