The financial challenges faced by Generation Z are becoming increasingly apparent in today’s society. According to a recent report from Bank of America, nearly half of Gen Zers between 18 and 27 are relying on financial assistance from their families. This reliance is driven by the high cost of living, with 52% of young adults citing day-to-day expenses as a top barrier to their financial success. Holly O’Neill, president of retail banking at Bank of America, highlighted the significant impact that the high cost of living is having on Gen Z. The survey conducted by the financial institution revealed that many consumers are feeling strained by rising prices, particularly for food, gas, and housing.
Compared to previous generations, young adults today are facing additional financial challenges. Not only are their wages lower than what their parents earned at the same age, but they are also burdened with larger student loan balances. Reports indicate that Gen Zers are spending significantly more on necessities than young adults did a decade ago, leading to increased financial strain. The New York Fed reported that roughly 15% of Gen Zers have maxed out their credit cards and are at risk of falling behind on payments, highlighting the financial pressures faced by this generation.
One of the biggest financial challenges for young adults today is the high cost of housing. According to Bank of America, housing is the expense that most young adults need assistance with after food and groceries. A staggering majority of Gen Zers do not pay for their own housing, with two-thirds of those surveyed spending more than 30% of their paycheck on housing. This situation can have long-term implications on wealth accumulation, as homeownership is considered one of the greatest tools of wealth creation. Brett House, an economics professor at Columbia Business School, emphasized that those priced out of the housing market face significant challenges in achieving financial security.
Experts recommend that individuals spend no more than 30% of their take-home pay on shelter. However, many young adults are exceeding this threshold, with nearly a quarter of those surveyed spending upwards of 50% of their income on housing. Holly O’Neill suggests adhering to the 50-30-20 rule, which involves allocating 50% of income to necessities, 30% to discretionary spending, and 20% to savings. This rule can help young adults better manage their finances and build a stronger financial foundation for the future.
It is not just Generation Z that is facing financial struggles in today’s economy. A separate report by Bankrate indicates that most Americans do not feel financially secure, with only 25% of adults considering themselves completely financially secure. The report also found that Americans believe they would need to earn an average of $186,000 to live comfortably and over half a million dollars to feel rich. Inflation, housing costs, and college affordability are identified as significant obstacles to achieving financial security.
The financial struggles faced by young adults today, particularly Generation Z, are complex and multifaceted. Rising living costs, stagnant wages, increasing debt levels, and high housing expenses all contribute to the overall financial insecurity experienced by this demographic. Addressing these challenges will require a combination of policy interventions, financial education, and individual financial management strategies to help young adults navigate these turbulent economic times.