Bank of America’s annual Better Money Habits survey provides insights into approaches the younger generation is taking to gain its financial footing in the current economic environment.
Today, 85% of Gen Zers cite one or more barriers to achieving financial success and topping the list is the higher cost of living, cited by 53% of respondents.
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The majority of Gen Zers are changing their spending and lifestyles, including cooking at home more frequently (43%) rather than dining out, spending less on clothes (40%) and limiting grocery purchases to the essentials (33%).
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.
To target Gen Z, companies are implementing new strategies and products based on what appeals to this generation to encourage them to keep spending.
Gen Z consumers’ financial health under inflation
Over the last year, nearly four in ten 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.
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By GlobalDataWhile a little more than 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) or feel equipped to save for retirement (40% vs 51% of men).
According to Bank of America data regarding credit and debit card spending per household, Gen Z spending declined by more than 2% between May 2022 and May 2023. Meanwhile, spending increased by 2.5% (Boomers) and 5% (Traditionalists).
On top of this, confidence in the economy among Gen Z is waning due to inflation. 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.
Top financial priorities for Gen Z
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%).
Bank of America president of retail banking Holly O’Neill commented: “This younger generation has proven resilient and resourceful in managing their money during a challenging environment and adapting their lifestyles as needed.”
