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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
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.
Is Gen Z financially literate? ›
Whether it's investment strategies, spending habits or confidence in their financial knowledge, each generation differs from one another when it comes to their finances. However, among all of the generations, it's Gen Z that is proven to have the lowest financial literacy levels.
What is Gen Z struggling with the most? ›
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.
How is Gen Z doing financially? ›
Gen Zers Emerge as Young Investors
The May 2023 report found that 56% of those ages 18 to 25 in the U.S. had at least some investments. The research's findings pointed to the ease of accessing financial information on social media and the growth of investing apps and cryptocurrencies as low barriers.
Does Gen Z care about money? ›
Aligning on money is all the more pressing for younger generations, who are earlier on in their relationships and careers—nearly half (49%) of Gen Zers view financial compatibility as more important than physical compatibility.
What generation holds the most debt? ›
Of all generations, there's one that has more debt than the rest: Generation X. A Generation X consumer must work, on average, almost four full years to pay off all outstanding debts, compared to 3.3 years for millennials and two years for Gen Z, the youngest generation, and slightly more than baby boomers and seniors.
What is Gen Z suffering from? ›
The four most common diagnoses among the survey respondents were anxiety, depression, attention-deficit/hyperactivity disorder (ADHD), and post-traumatic stress disorder.
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.
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.
Is Gen Z the most misunderstood generation? ›
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.
Who does Gen Z trust the most? ›
The most trusted institutions are Science, the military and the medical system. Similarly, fewer than one in four Gen Z members trust the information they find on the internet, the U.S. Supreme Court and the criminal justice system. Science garners the most trust, at 71%.
What generation is the best educated? ›
Millennials are the most educated generation in U.S. history, but student debt and new models of education are making them reconsider the value of a traditional four-year degree.
What percentage of Gen Z is college educated? ›
What is the percentage of Gen Z students attending college compared to previous generations? Gen Z students are attending college at slightly lower rates compared to previous generations; 65% of Gen Z students are enrolled in college, compared to 67% of Millennials at the same age.
Will Gen Z be able to afford houses? ›
Gen Z seems to have a bit of savvy when it comes to the housing market. For example, many Gen Z homebuyers managed to take advantage of lower interest rates in 2020 and 2021. Since then, interest rates have increased to 7-8% depending on the loan. Interestingly enough, that rate hike isn't scaring Zoomers either.
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.
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.
