The report: 2024, The State of Gen Z’s Financial Health
Source: Bank of America
Why we picked it: Since Bank of America first released The Better Money Habits survey in 2021, its analysis of Gen Z and their financial behaviors has been a consistently powerful yardstick for The Financial Brand. As Gen Z moves out of their young 20s and into their mid/late 20s and early 30s, it’s critical to know where their painpoints are — and how financial institutions can address them and mitigate mistakes made with prior generations.
Executive Summary
Gen Z is walking a precarious financial tightrope. A new Better Money Habits study from Bank of America’s reveals over half of adult Gen Z Americans (ages 18-27) feel they don’t make enough money to live the life they want. This stark reality paints a picture of a generation grappling with financial challenges that seem increasingly insurmountable. While it’s a challenge that every generation has likely faced in one regard or another, Gen Z faces particularly frightening challenges.
The 2024 Better Money Habits study, conducted in April and May, surveyed a nationally representative sample of 1,091 Gen Z adults. It uncovers a generation caught between aspirations and economic realities, with many relying on financial support from family and struggling to save for the future, despite their demonstrated resilience and a determination to adapt to the high-cost environment.
Key Takeaways:
- 52% of Gen Z report that high cost of living is a main financial challenge, a figure consistent with previous years.
- Over half (54%) receive financial assistance, primarily from parents or other family members.
- While 82% of Gen Z have financial goals, many face barriers in achieving milestones like homeownership and marriage.
- Gen Z women and young minority adults face unique financial challenges, often at higher rates than their peers.
The High Cost of Living: A Persistent Hurdle
The study reveals that the high cost of living continues to be a significant obstacle for Gen Z. Over half (52%) of respondents cited it as one of their main financial challenges, a figure that has remained consistent since 2022. This persistent issue is compounded by the fact that 37% of Gen Z feel they don’t “make good money.”
This concept of “making good money” can mean different things for different people. Over half of the Gen Z respondents surveyed by Bank of America say it means they can cover most of their non-essential spending. For others, it means maintaining a healthy balance of wants versus needs.
For instance, of the 46% of Gen Zers covering their cost of living, nearly a quarter said more than half of their monthly paycheck is swallowed by housing expenses. That being said, a healthy majority are consistent with industry recommendations: 64% say 30% of their monthly paycheck goes toward housing costs.
The other half of Gen Z is turning to friends and family for supplemental financial support — and it’s not limited to students. Even among non-students, 37% reported receiving financial help, with 30% getting support from parents or other family members. The level of assistance varies, with almost a third (32%) of those receiving help getting $1,000 or more per month.
The financial support Gen Z receives goes towards essential expenses. The top uses include groceries and toiletries (57%), rent and utilities (53%), phone plans (53%), and health insurance or payments (49%). This breakdown illustrates how financial assistance is often crucial for covering basic living expenses rather than discretionary spending.
Very Little Savings and Even Less Drive to Invest
Our coverage of Gen Z has always reflected the young community members as earnest advocates of financial health and savings forward behavior, and that’s only further indicated in this report. Eighty-two percent of respondents told Bank of America they have financial goals and over half said they’re working on both short- and long-term goals.
That being said, the reality of both the economy and their role in it is rolling into focus — and hard. Almost a third (30%) reported that they would like to save but don’t make enough money to do so. This inability to save was cited by 17% as a barrier to financial success, a figure consistent with findings from previous years.
A lack of proper emergency savings is particularly concerning. Over half (57%) of Gen Z does not have enough emergency savings to cover three months of expenses and only 18% said they had built or contributed to an emergency fund in the past year, showing a slight improvement from previous years but still highlighting the significant gap between goals and financial preparedness.
For many Gen Z individuals, saving is an inconsistent practice. Well over a third shared that they put any leftover money into savings, which inevitably varies month-to-month. Only 15% reported putting a set percentage of their paycheck into a savings account each month, highlighting the challenges of establishing consistent saving habits in the face of financial pressures.
Investing is even more problematic. Less than two out of ten Gen Zers are contributing to their 401(k)s and stock market investing engagement is even lower. The study highlights a significant gap between Gen Z’s life aspirations and their ability to achieve them in the near future. Lack of income is a major barrier, with 38% reporting that they don’t have enough income to achieve their financial goals.
When asked about being able to achieve these goals over the next five years, a significant portion of Gen Z responded “No, but I want to” for several key goals:
- Buying a home: 50%
- Getting married: 33%
- Buying a car: 32%
- Living alone: 31%
- Starting a family/having kids: 28%
How is Gen Z Adapting to Financial Pressures?
Despite the challenges, Gen Z demonstrates resilience and adaptability in managing their finances. A majority of respondents feel equipped to handle financial basics, including managing day-to-day expenses (70%), sticking to a budget (70%) and building credit/managing credit wisely (66%). These figures have remained relatively stable since 2022, indicating a consistent level of financial literacy among Gen Z.
To offset growing expenses, two-thirds (67%) of Gen Zers are implementing lifestyle changes. The most common adjustments include:
- Cutting back on dining out (43%)
- Passing on events with friends (27%)
- Shopping at more affordable grocery stores (24%)
- Starting to use a budget (21%)
Importantly, over a third (38%) of Gen Z is comfortable declining social activities and being transparent about their financial limitations. This openness about financial constraints is further reflected in the fact that over half (63%) of Gen Z said they do not feel pressured by their friends to spend beyond their means.
Gen Z women in particular are taking proactive steps to manage their finances. Over two-thirds (68%) have made lifestyle changes in the last year, compared to 51% of men. They are also more likely to cut back on unnecessary expenses, such as dining out (50% vs. 37% of men) and passing on events with friends (31% vs. 24% of men).
Looking for a deeper dive into the demographics of Gen Z and the individual painpoints of various racial and ethnic groups? Please see the Bank of America study to learn more.
Conclusion: A Generation at a Financial Crossroads
The 2024 Better Money Habits study paints a complex picture of Gen Z’s financial health. While facing significant challenges related to the high cost of living, insufficient income and difficulties in saving, this generation does continue to show strengths in resilience and adaptability. Many are implementing smart financial strategies, prioritizing their goals and being transparent about their financial limitations.
However, the study also highlights concerning trends, particularly in areas of long-term financial security such as retirement savings and investments. The gap between Gen Z’s aspirations for major life milestones and their current financial realities suggests potential delays in achieving these goals.
As Gen Z navigates these financial challenges, continued support, education and resources from the financial institutions they bank with will be crucial. The findings of this study underscore the need for targeted financial literacy programs, policy interventions to address the high cost of living, and innovative solutions to help this generation build long-term financial stability.
Editor’s note: This article was prepared with AI language software and edited for clarity and accuracy by The Financial Brand editorial team.