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It’s no secret that, exposed to unprecedented levels of stress and burnout, today’s young adults struggle to find relevant purpose in an increasingly disconnected world.
Now experts warn Gen Z is even worse off than we feared: they are far from prepared for the future ahead.
With automation quickly replacing many lower-skilled jobs, educational institutions failing to equip their students with practical skills, and economic uncertainty on the horizon, it’s become clear that our current systems are no longer enough, Gen Z urgently needs stronger proximity to purposeful pathways for them to have any hope of thriving in a 21st-century economy.
We must turn things around if our youth are to succeed, but how? In this article, we’ll tackle this pressing issue head-on by looking at the key strategies for preparing Generation Zers for success.
Lack Of Credit
Gen Zers are often dealing with a lack of credit, due to their young age and limited income.
This means they may struggle to access the capital needed for large purchases (such as a house or car) or even start their own business.
To help Gen Zers build good financial habits and gain access to capital, institutions must create better credit-building opportunities.
One example of this is the recently introduced “Opportunity Score,” which credit bureaus offer as an alternative to traditional credit scores.
This score takes into account things like rent payments, utility bills, and cell phone payments – all of which may be more indicative of a Gen Zer’s ability to manage their finances responsibly than their traditional credit score.
Unrealistic Financial Expectations
They may think that they need to purchase expensive items to keep up with their peers, or they may overestimate how much money they will make in the future.
Often times, they will believe they need to be in the same place as their parents when they need more time to achieve their goals.
To combat this, institutions should provide more education about budgeting and saving to help Gen Zers understand the importance of long-term financial planning and goal setting.
The Future Is At Risk
While there are some good habits Gen Z is following, like saving money, the reality is too many overspend.
And worse, most do not have a grasp on reality when it comes to buying a home.
Granted there is still time for things to improve, but depending on who they get their financial advice from, they could be struggling for a long time.
Most Do Not Budget
Even though the majority of those surveyed make it a priority to save money, only 51% have a budget.
This means that many Gen Zers could be leaving money on the table, both in terms of saving more or seeing where they are overspending and making adjustments.
Top Budgeting Categories
Of those that do budget their money, here are the top five budgeting categories:
- Food: 80% budget for this expense
- Rent: 65% budget for this expense
- Utilities: 54% budget for this expense
- Transpiration: 51% budget for this expense
- Entertainment: 48% budget for this expense
While budgeting can seem daunting, the good news is that the 50/30/20 rule can make a tremendous difference in spending and saving.
Close to 70% Are Trying to Save Money
The good news is the survey did note that 70% are saving money.
This is good to hear because putting money aside is the only way you will get ahead financially.
Most Gen Zers Want to Buy a Home
As we saw, 56% are currently saving for a home, but many more have a goal of homeownership.
Over 44% want to own a home within the next five years, and close to 36% aim to buy in 10-15 years.
Another 20% think this purchase will happen further in the future.
Even Worse, They Underestimate How Much a Home Costs
Gen Z’s challenges are real, and it is important to remember the cardinal rule of home buying: do not buy a house you cannot afford.
The last thing you want to be is house rich and cash poor as it impacts all other areas of your life.
And in some cases, it can make living miserable.
Sadly, 81% of them do not have realistic expectations when it comes to home prices.
The median sales price in the U.S. is $363,300; of those surveys, most assume the cost to buy a home is $223,468.
This can cause all sorts of issues, from not having enough for a down payment to not being able to find a house they want to own.
Nearly Half of Gen Z Spends More Than They Earn
In a recent survey of Gen Z’s finances, 43% admit to spending more than they earn.
The survey did not detail whether this overspending was simply from a high cost of living and trying to make ends meet or if it included discretionary spending that could be reduced.
Spending more than you earn for even a few months can lead to a dangerous financial picture if things aren’t corrected.
Top Goals For Saving Money
What goals is Gen Z saving their money for?
Here is a breakdown:
- Buying a home: 56%
- Building an emergency fund: 39%
- Retirement: 12%
- Taxes: 10%
It is great to have saving goals, but it can be difficult at times to prioritize how you spend, or for that matter, how to organize your money to get you to a stronger financial foundation.
This is where Dave Ramsey’s Baby Steps can help. They provide a clear-cut plan for improving your finances over time so that you use your money in ways that benefit you most.
But Admit Challenges Are Real
When buying their home, they know they will face many obstacles.
Here are the top five challenges Gen Z expects to face:
- Having enough for a down payment: 22%
- Not knowing where to start: 21%
- Finding a home in their price range: 18%
- Have good enough credit: 16%
- Having too much student loan debt: 11%
Most Get Financial Advice From Their Parents
Finally, nearly 40% of Gen Z get financial advice from their parents.
Another 12% get advice from social media.
The good news is they are getting financial advice.
The bad news is there is no guarantee the people they are getting advice from know what they are talking about.
Since schools don’t teach personal finance, we must learn it independently.
This can lead to missing out on important concepts or thinking some bad advice is actually good.
Say Goodbye to Boomer Traditions
Gen Z is shaking up life as we know it, and this includes traditions that Boomers put in place decades ago.
Here are the biggest things this generation is saying no to.
Are You Being Watched
More and more of our privacy is taken away by our phones.
But it goes much deeper than this.
Find out the many other ways you are being watched.
How to Get Free Money
The idea of free money sounds like it can’t be true. But it actually is.
There are many ways you can get free money, from playing games, to watching videos, and more.
Here are the best ways you can get free money without having to work for it.
Growing up is part of life. Sadly, most schools don’t teach personal finance, so adulting when it comes to money can be complicated.
Luckily, here is a guide to adulting so you can more easily figure things out, without making major mistakes.
Steps To Building Wealth
We all want to have enough money that our finances are no longer a stress in our lives.
But with so much financial advice out there, building wealth seems impossible. Not any more. Here are the simple steps you need to take.
The data for this article can be found here.
I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.