So far, Gen Z workers are more likely to go to college, have a job, and earn more money than millennials. But they also pay 31% more for housing than their counterparts ten years ago, after adjusting for inflation. Auto insurance spending for people ages 16 to 24 more than doubled between 2012 and 2022, according to BLS data, while health insurance spending for that age group increased 46% after inflation.
In comparison, inflation-adjusted incomes for the cohort grew much less over the same period, by 26 percent, according to federal data.
“Gen Z consumers have seen their finances significantly affected by the pandemic and its aftermath, even more so than by the challenges millennials face in the wake of the global financial crisis,” said Michele Raneri, head of research American at TransUnion. “Both of these cohorts came out of difficult financial situations, but Generation Z is having a harder time affording this new cost of living.”
The financial woes plaguing Generation Z could help explain President Biden’s struggles to connect with younger voters, who cite inflation as their top concern. Just 32% of voters under 30 said in May that they would support Biden if the election were held today, giving him a two percentage point lead over Donald Trump, according to the GenForward survey. University of Chicago.
Compared to millennials of the same age, Gen Z has more debt of all kinds — including credit cards, car loans and mortgages — after adjusting for inflation, according to internal TransUnion records. Today’s 22- to 24-year-olds are also more likely to be behind on their credit cards and auto loans than the generation before them, the credit reporting agency found.
And debt levels have grown faster than Gen Z’s income., TransUnion found. Debt was equivalent to about 16% of Gen Z’s income at the end of last year, compared to 12% for millennials a decade earlier.
Sarah Martin, a 21-year-old living in Pittsburgh, began racking up credit card debt a few years ago with impulse purchases like clothes and makeup after pandemic restrictions were lifted. Things got out of hand with emergency dental work, leading her to max out one credit card and max out another. In all, Martin racked up about $8,000 in debt, which she is still working to pay off.
Her financial challenges, she says, seem inevitable. Martin was in grade school during the Great Recession, when both his parents lost their jobs and then their homes. Now, she faces the same financial obstacles in early adulthood, making her nervous about the future.
“I grew up in a lot of financial turmoil and I feel like it continues,” said Martin, who lives with her parents while she studies to become a medical coder. “High interest rates have definitely made me feel like I’m constantly wanting to pay off my debt, but it’s just never going to happen.”
According to the New York Fed, about 1 in 7 Gen Zers have maxed out their credit cards, more than any other generation. The ripple effects of this debt are also much greater than in the past, with average credit card interest rates at an all-time high, near 22 percent.
“Even accounting for inflation, those credit card balances (among Americans in their early 20s) have increased by about 25 percent. Defaults are higher among young adults today than in the past,” said Ted Rossman, credit card analyst at Bankrate. “Being a beginner and already behind on the eight ball can be a difficult cycle to break. »
Economists say timing is also important: The pandemic forced Gen Z to hunker down at home during their high school and college years, when they might otherwise have been able to hang out with friends, go to concerts or travel . Many were eager to make up for lost time as the world reopened in 2021.
That’s also when banks began relaxing their rules on who could qualify for a credit card, providing easy access to younger borrowers.
Thomas Black got his first credit card at the age of 18 in 2021 – and immediately maxed it out. He spent about $1,000 on gas and Christmas presents, then racked up a few thousand dollars more in debt when his car broke down.
“I spent the first three years of my adult life trying to pay that,” said Black, who works for a security company in Akron, Ohio. “I signed up for all the overtime I could, working 84 hours a week, just to make things clear. »
Generation Z is coming of age at a very different time than millennials, whose entry into the workforce coincided with two recessions. Many struggled to find jobs, particularly after the Great Recession, when the nation’s unemployment rate hovered around 10 percent for more than a year. Their salaries have also taken a big hit. On average, millennials lost about 13% of their income between 2007 and 2017, according to economist Kevin Rinz.
In contrast, the recovery since the pandemic has been rapid and widespread. Unemployment was below 4 percent for the longest period in 50 years through May, and young workers in particular saw some of the biggest pay increases. Wages for 16- to 24-year-olds rose 8.6 percent last year, compared with an overall increase of 5.2 percent, according to the Atlanta Fed.
Still, rising prices are a blow to Generation Z. Compared to other age groups, adults under 27 spend a larger share of their spending on basics like housing, restaurants, gas and car insurance – all of which have become much more expensive in recent years. , Moody’s emissions data.
“We’re at an inflection point: (Generation Z) is coming of age in an era of rising inflation and rising interest rates — and that’s going to stay with them,” said Jimmie Lenz, professor in financial economics at Duke University whose work focuses on generational behavior. “There’s the immediate impact: higher monthly payments on your credit card. But there will also be long-term impacts, such as making it more difficult to buy a house. »
Housing costs, which have increased rapidly since the pandemic, are by far the biggest burden for Generation Z. Adults under 35 are more likely to rent than own and tend to move more often, which may result in more frequent price increases.
In total, Gen Z is expected to spend an average of $145,000 on rent before the age of 30, compared to $126,000 spent by millennials at the same age, after inflation, according to an analysis by census data by RentCafe. Renting in major coastal areas such as the San Francisco Bay Area, Boston, and Honolulu has become especially expensive for today’s young adults.
In Birmingham, In Alabama, the rent on the apartment Edward Wyckoff, 25, shares with his mother has risen from $900 to $1,300 in recent years, a 44 percent increase.
Wyckoff was a sophomore in college when the pandemic began. He put his studies on hold, in part so he could meet household expenses, but says it became increasingly intimidating to complete his degree. He already has $18,500 in student loans and is worried about taking on more debt.
“It’s deeply ingrained in me that debt is a trap,” he said. “It seems like everyone I know is drowning in debt. »
Wyckoff hopes to return to school. He has worked several jobs to save money – driving a shaved ice truck and working as an assistant at a law firm – and is applying for scholarships and grants to ease the financial burden.
“Everything cost so much more that I had to work more than I thought,” he said. “I thought I could get by doing both school and work; I had to choose the job. This seems like a bit of a dead end, especially with the student loans I already have.
Gen Zers are not only more likely to have student loans, but they also have higher debt balances than millennials, according to the St. Louis Fed. As of June 2022, borrowers aged 20 to 25 had an average student debt of about $21,000, 13% more than millennials of the same age, after adjusting for inflation.
This is also the first generation where recent college graduates are more likely to be unemployed than the general population. According to the New York Fed, recent college graduates are having a harder time finding work than the rest of the population, marking a sharp reversal from long-standing norms.
Spencer Kammerman graduated from the University of California, Irvine with a degree in computer science and engineering three years ago. Since then, the 25-year-old has worked at two tech companies – and has been fired from both.
His last period of unemployment began eight months ago. He applied for hundreds of positions and made it to the final stages several times, including at SpaceX and a government drone contractor, before losing out to other applicants.
Kammerman, who exhausted his unemployment benefits a few months ago, recently moved back in with his parents in Orange County.
“It feels like the odds are against us,” he said. “It was difficult to get started. But I’m not giving up. »
Andrew Van Dam contributed to this report.