Gen Zers are having a harder time making ends meet, let alone building wealth.
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 recent Bankrate report. Gen Z is generally defined as those born between 1996 and 2012, including a cohort of teens and tweens.
In the face of a higher cost of living, 53% of Gen Z workers also said they have a side hustle — more than any other generation — to help cover their monthly expenses, Bankrate found. And fewer are saving for the future.
“This is a tougher climate, for sure,” said Laurence Kotlikoff, economics professor at Boston University and president of MaxiFi, which offers financial planning software. “Parents need to realize that their kids are in trouble.”
Gen Zers face greater obstacles to financial success
Inflation’s recent run-up has indeed made it harder for those just starting out. 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. 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.
Roughly three-quarters of Gen Z Americans said today’s economy makes them hesitant to set up long-term financial goals and two-thirds said they might never have enough money to retire, another recent Prosperity Index study by Intuit found.
Young adults also have the advantage of time
“Younger Americans haven’t had it easy in this economy, but any step they take toward strengthening the building blocks of their finances will pay off over time,” said Sarah Foster, analyst at Bankrate.
Gen Zers have the significant advantage of those extra years when it comes to saving for long-term goals such as retirement, she added.
“Prioritize investing in yourself, paying down debt and reaping the benefits of compound interest by saving for both the short and long term,” Foster advised.
The earlier you start, the more you will benefit from compound interest, whereby the money you earn gets reinvested and earns even more.
There are no magic bullets, Matt Schulz, LendingTree’s chief credit analyst, recently told CNBC — but there are a few financial habits that pay off. “Most things around saving aren’t super complicated but it doesn’t mean they’re easy to do,” he said.
“Just like having a healthy lifestyle, it’s just about doing the right things over and over again over time and having patience.”