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About 85% of Gen Zers cite one or more barriers to achieving financial success. Topping the list is the higher cost of living, cited by 53% of respondents to Bank of America’s annual Better Money Habits survey. The new research provides timely insights into approaches this younger generation is taking to gain its financial footing in the current economic environment.
Over the past year, nearly three out of four (73%) Gen Zers say they’ve changed their spending habits due to increased prices. Their lifestyle changes have included cooking at home more frequently (43%) rather than dining out, spending less on clothes (40%), and limiting grocery purchases to the essentials (33%). And nearly all those who adopted these new spending habits plan to maintain them over the next year (90%, 79%, and 80%, respectively) – even as inflation slows and price pressures decrease.
According to the Bank of America Institute, a significant gap opened in the last year between spending by younger and older generations.
According to Bank of America data regarding credit and debit card spending per household, Gen Z spending declined by over 2% between May 2022 and May 2023, while spending increased by 2.5% (Boomers) and 5% (Traditionalists).
“This younger generation has proven resilient and resourceful in managing their money during a challenging environment, and adapting their lifestyles as needed,” said Holly O’Neill President, of Retail Banking at Bank of America. “We continue to provide a wealth of resources and the guidance they need as they work toward financial independence and on building wealth.”
Over the last year, nearly four in 10 Gen Z (37%) say they’ve experienced a financial setback – such as decreased savings or additional debt – causing 27% to borrow money from friends or family. The reliance on friends and family is likely due in part to the fact that more than half (56%) say they do not have enough saved to cover three months of expenses in the event of an emergency.
While just over half of Gen Z (52%) feel confident that they’re on track to meet their financial goals, fewer than half (48%) are fully or even mostly financially independent.
However, Gen Z still feels able to handle everyday financial activities. The majority are confident in their ability to manage day-to-day expenses (69%), manage their budget (70%) and their credit (67%). However, they lack confidence around complex financial planning topics; fewer feel equipped to save for retirement (45%) or invest in the stock market (29%).
While Gen Z women continue to save more than Gen Z men, fewer Gen Z women are investing (11% vs. 18% of men) and feel equipped to save for retirement (40% vs. 51% of men). Confidence in the economy among Gen Z is waning. Over the year ahead, just 24% feel confident the economy will improve, compared to 41% in 2021; and 32% feel confident the job market will improve, compared to 46% in 2021.
Looking ahead to 2024, Gen Z’s top priorities include furthering their education (36%), advancing their career or increasing their salary (31%), and getting a new job (31%). This year, many Gen Z started a new job or took a new position (33%), negotiated a raise (22%), or applied for a job in a new field (14%). For those who started a new job, they were motivated by higher salaries (36%), better long-term prospects (32%), and saw a new role as a step up (32%).
