In a recent report from Bank of America, it was revealed that nearly half of Gen Zers between the ages of 18 and 27 rely on financial assistance from their parents. This reliance on parental support highlights the ongoing struggle many young adults face when it comes to meeting the high cost of living. Moreover, 52% of Gen Zers feel that they do not make enough money to live the life they want, with day-to-day expenses serving as a major barrier to their financial success. Holly O’Neill, president of retail banking at Bank of America, noted that the high cost of living is significantly impacting Gen Z, pointing to the financial challenges this generation is currently facing.
In addition to the rising cost of living, Gen Zers are also grappling with lower wages compared to their parents’ earnings at the same age, after adjusting for inflation. Moreover, many young adults are burdened with sizable student loan debt, further exacerbating their financial situation. Reports indicate that Gen Zers are spending more on necessities than previous generations, and a significant number have maxed out their credit cards, putting them at risk of falling behind on payments. This increased financial stress among some segments of the population is a cause for concern, according to researchers at the New York Fed.
Homeownership has historically been a key tool for wealth creation, but many Gen Zers have been priced out of the housing market, making it challenging for them to achieve the same level of financial security as previous generations. Brett House, an economics professor at Columbia Business School, highlighted the obstacles Gen Z faces when it comes to wealth accumulation. Housing is one of the biggest expenses for young adults today, with many needing help to cover the cost. Bank of America’s findings show that housing costs are a significant barrier for Gen Z, with a majority of them not paying for their own housing.
Experts recommend that individuals spend no more than 30% of their take-home pay on shelter. However, many young adults are spending far more than this, with two-thirds of those surveyed by Bank of America putting more than 30% of their paycheck toward housing. Nearly a quarter of respondents reported spending upwards of 50% of their income on housing. To promote better financial management, O’Neill advises adhering to the 50-30-20 rule, which involves allocating 50% of income to necessities, 30% to discretionary spending, and 20% to savings.
The financial struggles faced by Gen Z are not unique, as data from a separate survey by Bankrate indicates that most Americans feel they do not earn enough to live the life they desire. Only 25% of survey respondents reported feeling completely financially secure, with the majority expressing a need for higher income to achieve financial comfort. The survey revealed that Americans believe they would need to earn an average of $186,000 to live comfortably, while feeling “rich” would require an average income of over $500,000 per year. Inflation, housing costs, and college affordability were identified as significant obstacles to achieving financial security, underscoring the widespread financial challenges Americans are currently facing.
The financial struggles of Gen Z and Americans today are complex and multifaceted, encompassing issues such as rising living costs, stagnant wages, student loan debt, housing affordability, and inflation. Addressing these challenges will require a comprehensive approach that includes financial education, budgeting strategies, and policy changes to ensure that all individuals have the opportunity to achieve financial security and stability.