Gen Z’s unique money mindset and approach to financial wellness
Navigating the world of personal finance is daunting for anyone, but it’s a particularly pressing concern for members of Generation Z as they begin their careers and become financially independent. Adult Gen Zers, aged between 18 and 27, are grappling with new financial challenges at a time of expensive college costs, a competitive job market and sticky inflation, which reached a 40-year-high in 2022 and remains elevated on items such as food and shelter.
The effects of these financial concerns seep into Gen Z’s well-being, too. According to Bankrate’s money and mental health survey, nearly half of Gen Z respondents say that money negatively affects their mental health, at least occasionally.
Here’s a breakdown of how members of Gen Z approach money, what factors influence their approach and what advice others have for those of this generation.
Key financial insights on Gen Z
- Among Gen Z members, 47 percent say that money has a negative impact on their mental health. (Bankrate money and mental health survey)
- A significant 40 percent say they’re either slightly behind or significantly behind on their retirement savings. (Bankrate retirement savings survey)
- Across generations, Gen Z workers are the most likely (28 percent) to say they don’t know how much they’ll need for retirement. (Bankrate retirement savings survey)
- Nearly two-thirds (64 percent) of Gen Zers recently said they were likely to search for a new job in the next 12 months. (Bankrate job seeker survey)
Sources of financial stress for Gen Z
As Gen Z enters adulthood and works toward becoming financially independent, they often take on big money-related challenges and responsibilities, such as:
- Paying for college
- Establishing a career
- Establishing a budget from scratch
- Starting an emergency fund
For Gen Z, tackling these challenges can cause stress related to personal finance.
The top financial stressor for Gen Zers who said money concerns impact their mental health was paying for everyday expenses, which was cited by 52 percent of respondents in Bankrate’s money and mental health survey. Other commonly cited stressors included inflation and not having a stable income/job, both of which were cited by 50 percent of respondents, respectively. (Respondents could select more than one answer.)
The economic environment plays a part in affecting Gen Z’s mental health, too. They not only have to worry about high prices as they’re beginning their adult lives, but they also have the increasing cost of higher education weighing them down, with legal battles continuing over the Education Department and the Biden administration’s plan to forgive student loans under the Higher Education Act. More than 13 million Gen Zers have a student loan debt balance, according to the Education Data Initiative, which represents nearly 44 percent of the Gen Z population aged 18 and older.
Finally, emergency savings is a topic of concern for Gen Z, much like it is for many U.S. adults. In fact, regrets about not saving enough for emergency expenses are more likely to affect Gen Z than other generations, with 26 percent of Gen Z having these regrets, versus 21 percent of millennials, 16 percent of Gen Xers and 11 percent of baby boomers, according to Bankrate’s financial regrets survey. Though the higher prevalence of this stress among Gen Zers (who represent the youngest adult generation) could be related to their having had less time to save money than older generations.
Gen Zers can begin an emergency fund by contributing small amounts to a high-yield savings account, which will accumulate earnings at a faster pace than a typical savings account. Over time, regular contributions can grow into a substantial emergency fund.
The impact of high expenses on Gen Z
Achieving financial independence from parents is a considerable challenge among Gen Z as high costs of living continue to have an impact.
Significant expenses young adults face include high housing costs, with the median rent cost in the U.S. of $2,015 as of Nov. 30, 2024, according to Zillow. Another large expense is often food, with food prices climbing 2.1 percent over the year ending in October, according to the consumer price index (CPI) data.
High costs of living can also contribute to financial troubles for Gen Z, with 28 percent saying they live paycheck to paycheck, according to Bankrate’s survey on living paycheck to paycheck.
Gen Zers might find themselves leaning on their parents for financial help. Bankrate’s financial independence survey found that among adults aged 23 or older who say they receive or have received ongoing financial assistance from their parents:
- 49 percent have received help paying for housing.
- 48 percent have received help paying for everyday expenses such as groceries and utilities.
The constant struggle to make ends meet can leave little room for savings or investments, reinforcing a cycle of financial instability and, in many cases, dependence on parents’ incomes. Many Gen Zers may be left vulnerable to unexpected costs — considering their concern over a lack of emergency savings — and financial planning for the future may seem pointless or even impossible.
Comparing Gen Z’s money mindset to previous generations
- Every generation approaches money with a unique perspective shaped by experiences and technological advancements. Gen Z came of age during multiple financial crises, including growing up amid the Great Recession and reaching adulthood during the COVID-19 pandemic. They’ve also come into a financial world much more dominated by technology than it was in the past.
Here are some ways Gen Z members set themselves apart from their predecessors:
- Tech-savvy entrepreneurship: Gen Z grew up in a digital age, surrounded by technology that has shaped their lifestyle and approach to money. Many Gen Zers can leverage technology to pursue their passions and even turn them into successful side hustles. According to Bankrate’s side hustle survey, 48 percent of Gen Z respondents say they have a side hustle, the highest of any generation.
- Embracing digital banking: More than two-thirds (67 percent) of Gen Z members have an online savings account at a bank with no branches, according to Bankrate’s competitive savings survey. Online-only banks are known for offering perks such as high yields and low fees.
- More concern over job security: Half (50 percent) of Gen Zers who say money affects their mental health cite not having a stable income/job security as a factor, according to the Bankrate money and mental health survey. Having grown up during the Great Recession and, in many cases, having just entered the workforce, it is no surprise that job security is on many Gen Zers’ minds.
Financial advice for Gen Z from Bankrate experts
We asked Bankrate experts across various generations for what advice they’d give to Gen Zers, based on their own experiences, lessons learned and regrets from younger years. Here’s what they had to say.
Get in the habit of saving 15 percent of your income right off the top. Put 10 percent of your income toward retirement and the rest to building your emergency fund. If you can get in the habit of saving 15 percent of your income while you’re young and your earnings and expenses are low, the habit will stay with you in the years ahead as your income and expenses grow.— Greg McBride, CFA, Bankrate Chief Financial Analyst
While retirement may feel far off, there’s no better time to start saving for retirement than when you’re young. Every dollar you invest in your 20s could grow to $45 by the time you retire, assuming a 10 percent annual return. Even if you start small — such as investing at least enough to earn the employer 401(k) match — your future self will thank you.— Ted Rossman, Bankrate Senior Industry Analyst
Younger Americans are saving less for emergencies, taking on more credit card debt and pulling back on their retirement accounts because of inflation. They’ve been grappling with student loan debt, and amid ongoing inventory challenges and rising mortgage rates, it’s not getting any easier for them to buy a home. For Gen Zers hoping to avoid financial regrets later on, it’s important to remember that no step is too small, and you don’t have to wait for the economy to work in your favor to build wealth. What matters most is building the habit and the time you give yourself to get started.— Sarah Foster, Bankrate Principal U.S. Economy Reporter
Bottom line
The high rate of dependence on parents and the stress over paying for everyday living expenses reveal a generation grappling with economic challenges that undermine their financial security. Gen Z’s journey toward financial independence will require more opportunities for well-paid work and affordable housing options.
Gen Zers are resilient, though. They’re taking on more side hustles than any other generation, and they’re taking advantage of accounts at online-only banks, which often charge low (or no) fees and pay competitive yields. As they continue to make financial strides, it’s important that Gen Zers focus on a savings strategy that prioritizes emergency fund and retirement contributions, which can ensure their financial security during hardships and for the future.
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