Denise Gilbert is a Bank of America senior vice president and consumer banking market leader for Worcester.
Updated: 14 hours ago
Know How
How Gen Z can get on the right financial track
By Denise Gilbert
Since 2021, Bank of America’s Better Money Habits team has surveyed Gen Z as part of its mission to set up the next generation for financial success. The 2024 survey, conducted in April and May, revealed that Gen Z, young people between the ages of 18 and 27, are facing some significant financial challenges.
Despite almost all Gen Z respondents having financial goals, this generation is struggling to balance those priorities with the current high cost of living: Nearly a quarter (24%) say their income barely goes beyond the necessities, 46% are getting money from family and almost a third (32%) feel they are behind on their financial goals compared to where their parents were at the same age.
Gen Z also is paying a disproportionate amount of money on housing. The typical rule of thumb for how much you should spend each month on housing (rent and utilities) is between 20% to 30% of your take-home pay. Our report found that of adult Gen Z who cover their own housing costs, 64% spend over a third of their monthly paycheck on housing.
With so much of their income paying for housing, very little of their remaining funds can go toward savings. Over half don’t have enough emergency savings to cover three months of expenses. This lack of leftover income also affects Gen Z’s ability to save for retirement.
The good news is that despite the economic factors working against them, Gen Z is taking control of their spending. Gen Z’s top spending categories are dining out (36%), shopping (30%), and entertainment (24%). However, to keep these expenses from getting out of hand, two-thirds (67%) reported implementing lifestyle changes over the past year, such as cutting back on restaurants and shopping at more affordable grocery stores.
What more should they be doing? In order to improve their financial health and set themselves up for long-term success, Gen Z needs to keep savings in mind, even if it’s just a small amount.
They should focus on building sufficient emergency savings so they’re protected against unexpected expenses. If possible, Gen Z should start planning for their future in a tangible way. Contributing regularly to a 401(k) or other retirement savings vehicle is a great and simple way to do this. Opting into their company’s 401(k) programs, and contributing at a minimum enough to earn their employer match, is a wise decision.
Once Gen Z has saved their full three-to-six-month emergency fund and is contributing enough to a 401(k) to earn an employer match, then they should think about pivoting to other financial goals – such as investing, home or car buying, and others.
Financial pressures experienced by Gen Z may leave them feeling stressed and insecure, but many are implementing smart strategies that will help this generation build long-term financial stability.
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