Generation Z, born between the mid-1990s and early 2010s, has come of age during unique financial times. Despite their efforts to follow the advice of financial gurus who emphasize living debt-free, saving aggressively and avoiding credit cards, many Gen Z individuals nonetheless find themselves facing bankruptcy.
The difficult economic factors they are experiencing have led some young people to question whether traditional financial advice applies to them at all.
Skyrocketing housing prices
The housing market presents a significant challenge for Gen Z. Some financial advisors advocate for buying a house in cash, but with skyrocketing housing prices in many areas, saving up enough cash to make a down payment or to buy a house outright can be difficult, if not impossible, for many young adults.
Fluctuating income
Many Gen Z individuals are part of the growing gig economy, where they have less stable employment and income. This instability can make it difficult to follow advice to save and invest consistently, as their income may fluctuate from month to month.
Rising costs of living
Generation Z faces higher costs of living than previous generations as the price of healthcare, food and transportation continue to rise nationwide. These high monthly bills can make it challenging for them to save and invest.
Using credit cards to build credit
Traditional financial advice is to avoid using credit cards. However, 44% of Gen Z individuals in a recent survey reported using credit cards to build their credit scores. Without a strong credit history, it can be challenging to qualify for a mortgage. Thus, avoiding credit cards can make it harder for young families to achieve homeownership.
Seeing the world differently
Generation Z often prioritizes experiences and travel over traditional markers of success such as homeownership. This shift in priorities can lead them to approach finances differently. It also makes it harder for them to follow the advice that worked for their parents, which focused on long-term financial stability and wealth building.
Bankruptcy is not always the result of money mismanagement but can be due instead to difficult financial circumstances. Moving forward, Gen Z families may need to adapt the traditional advice they grew up hearing to better suit their circumstances and goals.
