To keep up with the high cost of living, many young adults are turning to a potential safety net: their parents.
Nearly half, or 46 percent, of Gen Zers between the ages of 18 and 27 rely on family for financial help, according to a new report from the bank of america.
Even more – 52% – said they don’t make enough money to live the life they want and cite everyday expenses as a top barrier to their financial success.
“The high cost of living is definitely affecting Gen Z,” said Holly O’Neill, president of retail banking at Bank of America.
The financial institution polled more than 1,000 Gen Z adults in April and May.
Why times are so tough for Generation Z
Many consumers are feeling squeezed by higher prices — mostly for food, gas and housing. However, those starting out face additional financial challenges.
Not only are their wages lower than what their parents earned in their 20s and 30s, after adjusting for inflation, but they also have larger student loan balances.
Even compared to millennials, Gen Zers spend far more on necessities than young adults did a decade ago, but reports show.
They also have a duty to prove it. About 15 percent of Gen Zers have maxed out their credit cards and are at risk of falling behind on payments, more than any other generation, the New York Fed reported in May.
“What delinquency rates show is that there is increased stress among certain segments of the population,” New York Fed researchers said at the time.
“The high cost of housing is definitely an obstacle”
In the years since the Covid pandemic, home ownership has been one of the biggest wealth creation tools – and those priced out of the housing market have disproportionately struggled to achieve the same level of financial security, according to Brett House, professor of economics. at Columbia Business School.
“This is a huge challenge for wealth accumulation among Gen Z,” he said.
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Second only to food and groceries, housing is the expense most young adults need help with today, Bank of America also found.
“The high cost of housing is definitely a barrier for them,” O’Neill said. “We also found that the majority of Gen Z are not paying for their own housing.”
Experts recommend spending no more than 30% of your pay on housing, but many self-employed young adults pay much more. Two-thirds of those surveyed by Bank of America said they spend more than 30% of their salary on housing, and nearly a quarter spend more than 50%.
O’Neill said she advises her own Gen Z kids to stick to the 50-30-20 rule, which recommends putting 50 percent of paychecks toward necessities, including food, housing and transportation, 30 percent for discretionary spending and the remaining 20% in savings.
Fewer Americans are financially comfortable overall
But it’s not just Gen Z that’s struggling. Most Americans believe they don’t earn enough to live the life they want these days, according to a separate Bankrate survey.
Just 25% of all adults surveyed said they were completely financially secure, up from 28% in 2023, the report said.
Survey respondents said it should you earn $186,000 on average to live comfortably, Bankrate found. But to feel rich, they would have to earn just over half a million a year, or $520,000, on average, according to the survey.
Likewise, the recent resurgence of inflation and specific challenges related to housing costs and college affordability have been significant barriers to achieving financial security, according to Bankrate.
“Many Americans are stuck somewhere between the ongoing shock of rising prices, a lack of income gains and a sense that their hopes and dreams are out of touch with their financial capabilities,” said Mark Hamrick, senior economic analyst at Bankrate .
