Gen Z, the generation born between the mid-1990s and the early 2010s, is entering adulthood with a generally positive financial outlook. Unlike previous generations, they seem optimistic, with a significant portion reporting improved financial situations and a strong belief in their ability to reach their retirement savings goals.

But is this aspiration grounded in reality, or is it a dream fueled by a hot job market with an uncertain future?

Key takeaways

  • 75 percent of employed Gen Z workers received a raise or found a better-paying job in the 12 months leading up to October 2023, a Bankrate survey published in November found.
  • A majority of Gen Z, 58 percent, felt optimistic about their financial future heading into 2024, according to a Bankrate poll.
  • However, this optimism seems out of step with how Gen Zers say they’re saving for retirement. Gen Z is the most likely generation to say they are saving less money compared to last year at 17 percent, and that they didn’t save for retirement this year or last year, at 29 percent, a Bankrate retirement survey found.
  • 29 percent of Gen Z didn’t contribute to their retirement account in 2022 or 2023, the Bankrate poll found.
  • Gen Z, more than any other age group, think they’d need to be a millionaire to be successful, at 16 percent, according to a May 2024 Bankrate survey.

Benefiting from a strong labor market

There’s no denying Gen Z’s optimism, despite financial challenges like student loan debt and an unaffordable housing market.

Bankrate surveys paint a clear picture: A significant portion, 37 percent, of Gen Z respondents reported their finances have improved since 2020, and a whopping 58 percent believe their situation will get even better in 2024, according to a recent Bankrate poll.

This confidence can be attributed largely to the red-hot job market. Early career adults, particularly Gen Z, have benefited immensely from the booming labor market, with wages growing at a much faster pace for this age group than for other demographics.

“The surprising strength of the job market and millions of open positions have meant consistent paychecks and plenty of opportunities for work and advancement,” says Greg McBride, Bankrate’s chief financial analyst.

Federal Reserve data shows wages for Gen Z workers jumped more than twice as fast as older workers (13 percent for those between the ages of 16-24 versus 4 percent for those ages 55 and up) at the peak of the post-pandemic boom.

“The early career years can see faster wage growth as you move from part-time, entry level jobs into full-time work, adding education, credentials, and other skills,” says McBride.

In fact, 75 percent of employed Gen Zers received a raise or found a better-paying job in the past 12 months through October 2023, a separate Bankrate survey published in November found.

Gen Z also appears to be engaging with financial education differently than previous generations at their age. They’re following financial creators on social media, reading about investing online and talking about money more openly than previous generations.

Witnessing others achieve financial goals might fuel their own desires to do the same. This enhanced financial literacy can be a powerful tool for navigating the complexities of personal finance.

But is the future really so bright?

Gen Z’s financial optimism is refreshing, but it needs to be tempered with a realistic understanding of the economic landscape and their own financial situation.

While the current job market favors Gen Z, its long-term sustainability remains to be seen. Economic cycles are a natural part of the system, and despite strong growth, headwinds remain for younger generations.

Student loan debt, a burden carried by many, strains finances and budgets. A majority of Gen Z borrowers, 74 percent, say they’ve stalled important financial decisions due to their student loan debt, according to a December 2023 Bankrate survey.

Inflation also chips away the purchasing power of savings over time. Market volatility and potential job market fluctuations are also concerns.

Younger people may be getting help from their parents, too. The number of young adults between the ages of 25-34 who live at home with their parents has risen 80 percent since 2003, according to Census Bureau data.

Gen Z’s financial vulnerability in the face of a downturn is worrisome. Nearly a fifth (18 percent) lack emergency savings, leaving them exposed if faced with job loss or unplanned expenses, according to a February Bankrate poll.

“While the job market is hot right now, it may not always stay that way,” says Hanna Horvath, a certified financial planner and senior editor at Bankrate. “Having money to cover you in case of job loss or any other costs is super important.”

Finally, the rising cost of living, particularly housing, might lessen the power of Gen Z’s seemingly impressive salaries.

“If your rent is eating up most of your budget, it can make it difficult to save or afford other necessary purchases,” says Horvath.

Gen Z’s outlook on retirement

Some 45 percent of Gen Z and millennial workers feel like they’re on track with retirement savings, compared to 26 percent of Gen X and 34 percent of boomers, according to a Bankrate survey.

Over a third (35 percent) say they’d need more than $1 million to retire comfortably  – the highest percentage of any generation. Some 58 percent of Gen Z workers who know how much they’d need to retire comfortably believe that they will be able to reach it.

However, this optimism seems at odds with the fact that 29 percent of Gen Z didn’t contribute to their retirement in 2022 or 2023, the poll found.

“It’s understandable that many Gen Zers haven’t been able to prioritize retirement, given the inflationary environment,” says Horvath. “Luckily, even small contributions to your retirement account can grow significantly over the years thanks to compound interest.”

Another factor to consider is the changing landscape of retirement itself. The traditional notion of retiring in one’s 60s may no longer be financially feasible for some. Social Security benefits might not be as robust when Gen Z reaches retirement age, and with an increasing life expectancy, they may need to financially support themselves longer than past generations.

How Gen Z can secure a bright financial future

This doesn’t mean early retirement is an impossible dream for Gen Z. But achieving it requires a healthy dose of realism and a solid financial plan.

Here are some key steps they can take:

  • Build an emergency fund: Having a safety net to cover unexpected expenses is crucial. Aiming for three to six months’ worth of living expenses in an emergency fund is a good starting point. Worryingly, though, 79 percent of Gen Z say they would be nervous about having enough emergency savings to cover their immediate living expenses for a month if they were to lose their primary source of household income tomorrow.
  • Prioritize debt management: Student loans and other debts can be a massive burden for young people. Develop a plan to pay down debt strategically while saving for retirement.
  • Invest early and consistently: Time is Gen Z’s greatest advantage. Even small, regular contributions to a retirement plan can grow significantly over time thanks to compound interest.
  • Seek professional guidance: Navigating financial decisions alone can be overwhelming. Consulting with a financial advisor can provide valuable personalized advice.

By setting realistic goals, prioritizing savings and making smart investment choices, Gen Z can increase their chances of achieving their financial goals.

Bottom line

Gen Z’s financial aspirations are a positive sign. Their focus on building a secure future positions them well for long-term success. While early retirement may remain a dream for some, a secure and prosperous future is definitely within reach for this ambitious generation.