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Gen Zers are cutting back on spending.
More than half, 53%, say a high cost of living is a barrier to their financial success, according to a new survey from Bank America.
Nearly 3 in 4 young adults surveyed, 73%, have changed their spending habits amid record-high inflation.
"Many of them are buckling down," said AJ Barkley, head of neighborhood and community lending at Bank of America, calling the results "good news."
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Among the changes they are making include cooking at home more frequently, with 43%; spending less on clothes, 40%; and limiting grocery shopping to essentials, 33%.
Most plan to keep up those changes in the next year, according to the firm's August survey of almost 1,200 young adults ages 18 to 26.
Gen Z faces unique financial challenges
Yet, more than a third of young Gen Zers have also faced setbacks in the past year, the survey found, which may have led them to stop saving or take on more debt.
Gen Z faces unique financial challenges compared to older generations. College graduates earn 10% less compared to their parents, recent research found.
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High inflation — and affordability concerns among Gen Zers — extend beyond U.S. borders. A Deloitte survey released earlier this year that included about 14,500 members of Gen Z in 44 countries found living paycheck to paycheck was a concern cited by about half of that generation, with 51%; followed by needing to take on a side job, 46%; and cost of living, 35%.
'This is really the time to build a solid foundation'
But there is good news, according to Bank of America's research. Most respondents feel confident they can manage their day-to-day expenses, budget and credit. Yet, they show less confidence when it comes to saving for retirement or investing in the stock market, the results found.
"This is really the time to build a solid foundation that is going to allow you to be successful throughout the many next decades of your financial life," said Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth in New York. Boneparth is also a member of the CNBC Financial Advisor Council.
Experts say these three tips can help members of Gen Z learn to manage their money wisely.
1.Make saving a habit
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More than half of Gen Z, 56%, do not have enough emergency savings to cover three months' worth of expenses, Bank of America's survey found.
It's a good idea to sock away any extra cash you can, said Boneparth, and to think about what's important to you to stay motivated.
"Get in the habit of being a consistent saver," Boneparth said.
Having that cash cushion set aside can help you continue to pursue your goals, even as life throws surprises your way. "It's never a straight line," Boneparth said.
2.Start investing for retirement now
While retirement may seem like a far-off goal, especially in the early years of your career, it's actually when you have your biggest advantage to accumulate wealth, according to Barkley.
Any money you invest now will have more time to accumulate gains that compound over time.
"They should be thinking about retirement now," Barkley said.
To get started, an employer-provided 401(k) may help with those initial contributions and may even include an extra boost from a company match, if offered.
Young investors may also open an individual retirement account on their own. Experts often recommend making post-tax contributions to a Roth IRA early on, as you may be prohibited from contributing to those accounts later in your career when your income is higher.
3.Resist the urge to give into FOMO
Gen Z women are more apt to feel pressured to spend to keep up with their social circles, Bank of America found.
Social media is a big driver of those feelings, with 41% of women Gen Zers saying their feeds make them wish they had more money for nonessential spending, versus just 24% of men.
All Gen Zers would be wise to avoid that FOMO, according to Ted Jenkin, a CFP and CEO ofoXYGen Financial in Atlanta. Jenkin is also a member of the CNBC FA Council.
"Your friends are not posting their net worth on Instagram and TikTok, so be wary that people may not be doing as well as they appear on social media," Jenkin said.
It also doesn't hurt to avoid credit card debt and to check your credit score regularly, Jenkin said.
FAQs
Gen Zers are cutting back on spending. More than half, 53%, say a high cost of living is a barrier to their financial success, according to a new survey from Bank America. Nearly 3 in 4 young adults surveyed, 73%, have changed their spending habits amid record-high inflation.
Why is Gen Z struggling financially? ›
Gen Zers face greater obstacles to financial success
Not only are their wages lower than their parents' earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.
Does Gen Z have a serious debt problem? ›
Gen Z is in the financial trenches. A new study from credit reporting agency TransUnion found those in their early 20s are earning less, have more debt and see higher delinquency rates than Millennials did at their age. The findings outline the credit usage of 22 to 24 year old Gen Zers.
What does Gen Z spend most money on? ›
46% of Gen Z spent more on fashion than anything else in 2022 (5WPR) Gen Z was the only generation to have clothing and fashion as their top spending category. 30% of Gen Z spent more on beauty and personal care than anything else, far more than any other generation.
What is the wealth inequality for Gen Z? ›
Younger American (millennial and Gen Z) families represented 33.4% of households and owned 9.2% of total family wealth (72% less wealth) in 2023. The baby boomers' shortfall was the smallest of the generations.
What does Gen Z struggle with the most? ›
Gen-Z Faces Financial Challenges, Stress, Anxiety And An Uncertain Future.
Will Gen Z be poorer than millennials? ›
Zoomers, however, are much better off than millennials were at the same age. The typical 25-year-old Gen Z-er has an annual household income of over $40,000, more than 50% above baby-boomers at the same age. Gen Z's economic power was on display at a recent concert by Ms Rodrigo in New York.
Which generation has the most credit card debt? ›
Gen X (Ages 44-59)
According to the Experian study, Gen X is the generation with the most credit card debt out of all generations at over $9,000 — a figure that exceeds the national average of $6,501 by more than 40%.
How many Gen Z have a credit card? ›
Nearly 84% of Gen Z consumers have a least one credit card, higher than the 61% of millennials who had at least one card 10 years ago.
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.
Young people, like people of all ages, enjoy burgers, pizza, chicken, sandwiches, salad, and fruit. And the younger they are, the more simple they like it, according to restaurant-hospitality.com. From middle school and beyond, their tastes broaden to include more flavors, combinations, and global variety.
Which generation is the richest? ›
Millennials stand to become the richest generation in history, after $90 trillion wealth transfer | CNN Business.
What is the main source of income for Gen Z? ›
According to the study, 47% of Gen Z who earn money on social media say they earn more money through content creation than they do working a traditional 9-to-5 job. This makes sense when you consider 61% of Gen Z don't believe their pay has kept pace with the cost of living.
Are Gen Z struggling financially? ›
Young members of Gen Z are struggling more financially today than Millennials did at their age 10 years ago, according to a new study published last week by the credit reporting agency TransUnion.
What does Gen Z think of their parents? ›
Though the challenges facing Gen Z are unique, issues with their parents often boil down to age-old “difficulties in communication, boundary setting and honesty, often rooted in fear, whether it be fear of judgment, fear of failure, fear of harm or even fear of change,” Efron said.
What is considered rich in 2024? ›
For example, individuals with $1 million in liquid assets are generally classified as having a high net worth. To be considered very high net worth, one might need assets ranging from $5 million to $10 million, while an ultra-high net worth status could require $30 million or more.
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. Sponsored: Protect Your Wealth With A Gold IRA.
Is Gen Z financially literate? ›
Financial literacy tends to be low within each of the five generations, but particularly so among Gen Z. Two-thirds of Gen Z could answer only 50% or less of the index questions correctly.
How are Gen Z making money? ›
According to the study, 47% of Gen Z who earn money on social media say they earn more money through content creation than they do working a traditional 9-to-5 job. This makes sense when you consider 61% of Gen Z don't believe their pay has kept pace with the cost of living.
How many Gen Z live paycheck to paycheck? ›
Conclusion. With many yet to launch into well-paying jobs or careers, Gen Z remains a vulnerable age group, as they tend to earn less than older consumers. As a result, 6 in 10 Gen Z consumers live paycheck to paycheck, with their pay just covering monthly expenses.
