To keep up with the high cost of living, many young adults turn to a likely safety net: their parents.
Nearly half, or 46%, of Gen Zers between the ages of 18 and 27 rely on financial assistance from their family, according to a new report from Bank of America.
Even more — 52% — said they don’t make enough money to live the life they want and cite day-to-day expenses as a top barrier to their financial success.
“The high cost of living is certainly impacting Gen Z,” said Holly O’Neill, president of retail banking at Bank of America.
The financial institution polled more than 1,000 Gen Z adults in April and May.
Why times are so tough for Generation Z
Many consumers feel strained by higher prices — most notably for food, gas and housing. However, those just starting out face additional financial challenges.
Not only are their wages lower than their parents’ earnings when they were in their 20s and 30s, after adjusting for inflation, but they are also carrying larger student loan balances.
Even compared with millennials, Gen Zers are spending significantly more on necessities than young adults did a decade ago, other reports show.
They also have the debt to prove it. Roughly 15% of Gen Zers have maxed out their credit cards and are at risk of falling behind on payments, more so than any other generation, the New York Fed reported in May.
“What delinquency rates are showing is that there is increased stress among some segments of the population,” the New York Fed researchers said at the time.
‘The high cost of housing definitely is a barrier’
In the years since the Covid pandemic, homeownership has been one of the greatest tools of wealth creation — and those who have been priced out of the housing market have disproportionately struggled to achieve the same level of financial security, according to Brett House, economics professor at Columbia Business School.
“That is a massive challenge for wealth accumulation among Gen Z,” he said.
More from Personal Finance:
Inflation is causing financial stress
This ‘bucket strategy’ could lower your taxes in retirement
More Americans are struggling even as inflation cools
Second only to food and groceries, housing is the expense most young adults today need help with, Bank of America also found.
“The high cost of housing definitely is a barrier for them,” O’Neill said. “We also found that the majority of Gen Z don’t pay for their own housing.”
Experts recommend spending no more than 30% of your take-home pay on shelter, but many young adults covering their own expenses are shelling out far more. Two-thirds of those Bank of America surveyed said they put more than 30% of their paycheck toward housing, and nearly a quarter spend upwards of 50%.
O’Neill said she advises her own Gen Z children to adhere to the 50-30-20 rule, which recommends putting 50% of a paycheck toward necessities, including food, housing and transportation, 30% to discretionary spending and the remaining 20% into savings.
Fewer Americans feel financially comfortable overall
But it’s not just Gen Z struggling. Most Americans believe they don’t earn enough to live the life they want these days, according to a separate survey, by Bankrate.
Just 25% of all adults in the survey said they are completely financially secure, down from 28% in 2023, the report said.
The survey respondents said they would need to earn $186,000 on average to live comfortably, Bankrate found. But to feel rich, they would need to earn a bit more than half a million a year, or $520,000, on average, the survey found.
Similarly, inflation’s recent runup and specific challenges related to housing costs and college affordability were significant obstacles to achieving financial security, according to Bankrate.
“Many Americans are stuck somewhere between continued sticker shock from elevated prices, a lack of income gains and a feeling that their hopes and dreams are out of touch with their financial capabilities,” said Mark Hamrick, Bankrate’s senior economic analyst.
