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 family. This statistic paints a picture of the challenging financial landscape that many young adults are facing today. With 52% of Gen Zers feeling like they don’t make enough money to live the life they want, it is clear that the high cost of living is taking a toll on this generation. Day-to-day expenses are cited as a top barrier to financial success, highlighting the need for additional support.
One of the key challenges faced by Gen Z is the high cost of living, which has been further exacerbated by the Covid-19 pandemic. Not only are wages lower when compared to previous generations, but young adults today are also burdened with larger student loan balances. This, combined with higher prices for essentials such as food, gas, and housing, has created a financial strain for many Gen Zers. Reports show that this generation is spending significantly more on necessities than young adults did a decade ago, leading to increased levels of debt.
Homeownership has traditionally been a key tool for wealth creation, but many Gen Zers have been priced out of the housing market, making it difficult for them to achieve the same level of financial security. According to economics professor Brett House, this poses a massive challenge for wealth accumulation among Gen Z. Housing, along with food and groceries, is one of the biggest expenses that young adults today need help with. The majority of Gen Z individuals do not pay for their own housing, further highlighting the financial challenges they face.
Experts recommend that individuals spend no more than 30% of their take-home pay on shelter. However, many young adults today are spending far more, with two-thirds of those surveyed by Bank of America putting more than 30% of their paycheck towards housing. To address this issue, Bank of America president Holly O’Neill advises adhering to the 50-30-20 rule, which involves putting 50% of a paycheck towards necessities, 30% towards discretionary spending, and the remaining 20% into savings. This structured approach can help individuals better manage their finances and prioritize their spending.
It’s not just Gen Z that is struggling financially. A separate survey by Bankrate found that most Americans believe they do not earn enough to live the life they want. The survey revealed that just 25% of adults feel completely financially secure, down from 28% in previous years. To live comfortably, respondents said they would need to earn an average of $186,000, while feeling rich would require an average yearly income of over half a million dollars. Inflation, housing costs, and college affordability were identified as significant obstacles to achieving financial security, highlighting the widespread impact of these financial challenges.
The financial struggles faced by Gen Z and beyond are complex and multifaceted. From reliance on family financial assistance to challenges related to housing costs and debt, young adults today are navigating a difficult financial landscape. By addressing these issues head-on, implementing financial management strategies, and seeking support when needed, individuals can work towards achieving greater financial stability and security in the face of these ongoing challenges.