Navigating the world of personal finance can be difficult for anyone, but it’s an especially pressing concern for members of Generation Z who are starting their careers and becoming financially independent. Adults between the ages of 18 and 27, Gen Z, are struggling to find new jobs amid high college costs, a competitive job market, and continued inflation, which is expected to hit a 40-year high in 2022 and keep items like food at high levels. The country is facing major economic challenges. And a shelter.
The impact of these economic concerns is also impacting Gen Z’s well-being. According to Bankrate’s Money and Mental Health Survey, nearly half of Gen Z respondents say money negatively impacts their mental health at least some of the time.
Here’s how members of Gen Z approach money, what factors influence their approach, and what advice others have for people in this generation. Breakdown of dolphins.
Key economic insights about Gen Z
- 47% of Gen Z say money has a negative impact on their mental health. (Survey on bank interest rates and mental health)
- A significant 40% say they are either slightly or significantly behind in saving for retirement. (Bank interest rate retirement savings survey)
- Across all generations, Gen Z workers (28%) are the most likely to say they don’t know how much they’ll need in retirement. (Bank Interest Retirement Savings Survey)
- Nearly two-thirds (64%) of Gen Z recently said they are likely to look for a new job in the next 12 months. (Bankrate job applicant survey)
Sources of financial stress for Gen Z
As Gen Zers enter adulthood and strive to become financially independent, they often take on major money-related challenges and responsibilities, including:
For Gen Z, tackling these challenges can cause stress related to personal finance.
For Gen Z, the biggest source of financial stress is paying everyday bills, cited by 52% of respondents in Bankrate’s Money and Mental Health survey. Ta. Other commonly cited stressors include inflation and the lack of a stable income or job, both cited by 50% of respondents each. (Respondents can select multiple answers.)
The economic environment also impacts Gen Z’s mental health. As they begin their adult lives, they not only have to worry about rising prices, but also the increasing cost of higher education, including ongoing legal battles over the Department of Education and the Biden administration’s student loan forgiveness plan. It is also a burden. Higher Education Act. According to the Education Data Initiative, more than 13 million Gen Zers carry outstanding student loan debt, representing approximately 44% of the Gen Z population age 18 and older.
Finally, like many American adults, emergency savings is a concern for Gen Z. In fact, the regret of not saving enough for an emergency expense is more likely to affect Gen Z than any other generation, with 26 percent of Gen Z having these regrets. 21 percent of Millennials, 16 percent of Gen Xers, and 11 percent of Baby Boomers. According to Bankrate’s Financial Regret Survey. However, the higher prevalence of this stress among Gen Z (representing the youngest adult generation) may be related to them having less time to save money than older generations. There is a gender.
Gen Z can start an emergency fund by contributing small amounts to a high-yield savings account, which accumulates earnings at a faster pace than a regular savings account. Over time, regular donations can grow into a large emergency fund.
Impact of high spending on Gen Z
Gaining financial independence from their parents is a major challenge for Gen Z as the high cost of living continues to impact them.
According to Zillow, significant expenses young people face include high housing costs, with the median rent in the U.S. being $2,015 as of November 30, 2024. Another big expense is often food, which rose 2.1% in the year to October, according to Consumer Price Index (CPI) data.
The high cost of living can also contribute to Gen Z’s financial hardship, with 28% saying they live paycheck to paycheck, according to a Bankrate survey on living paycheck to paycheck.
Gen Z may find themselves relying on their parents for financial support. Bankrate’s Financial Independence Survey found that among adults age 23 and older who said they received or are receiving ongoing financial support from their parents:
- 49% receive assistance with housing costs.
- 48% receive help paying for daily living expenses such as groceries and utilities.
Constantly struggling to make ends meet leaves little room for savings and investment, reinforcing the cycle of financial instability and often leaving children dependent on their parents’ income. Considering many Gen Z’s concerns about not having enough emergency savings, future financial planning can seem pointless or even impossible, leaving them exposed to unexpected expenses. I don’t know.
Comparing Gen Z’s attitudes toward money with previous generations
Financial advice for Gen Z from Bankrate experts
We asked Bankrate experts from different generations what advice they would give to Gen Z based on their own experiences, lessons learned, and regrets from their youth. Here’s what they had to say:
Get into the habit of saving 15% of your income right away. Dedicate 10% of your income to your retirement fund and the rest to building your emergency fund. If you can develop the habit of saving 15% of your income when you’re young and your income and expenses are low, that habit will last for years to come, even as your income and expenses increase.
— Greg McBride, CFA, Bankrate Chief Financial Analyst
Retirement may feel like a long way off, but there’s no better time to start saving for retirement than when you’re young. Assuming a 10% annual return, a dollar invested in your 20s could grow to $45 by the time you retire. Even if you start small, like investing enough to earn your employer’s 401(k) match, your future self will thank you.
— Ted Rothman, Bankrate Senior Industry Analyst
Young Americans are cutting back on emergency savings, racking up credit card debt and draining retirement accounts due to inflation. They are struggling with student loan debt, inventory issues continue, and mortgage rates are rising, so buying a home is never easy. For Gen Zers who want to avoid financial regrets later, it’s important to remember that no step is too small and you don’t have to wait for the economy to work in your favor to build wealth. . The most important thing is building the habit and the time you give yourself to get started.
— Sarah Foster, Bankrate Principal U.S. Economics Correspondent
conclusion
High levels of dependence on parents and stress over paying day-to-day living expenses make it clear that this generation is grappling with financial challenges that undermine their financial security. To achieve financial independence, Gen Z will need more opportunities for well-paying jobs and affordable housing options.
However, Gen Z is resilient. They have more side hustles than any other generation and often use online-only bank accounts that pay low (or no) fees and competitive yields. As Gen Z continues to advance financially, it’s important to focus on a savings strategy that prioritizes emergency funds and retirement. This will ensure your financial security during difficult times and in the future.
