- Nearly 30% of Gen Z between the ages of 18 and 25 still live at home with parents or relatives
- 32% of zoomers spends half of their monthly income on housing (rent/mortgage)
- 28% of Gen Z are unable to save money right now
It’s an expensive time to be alive, and that’s putting it lightly. Rising inflation, record gas prices and increased housing prices are just a few factors fueling the cost of living crisis in the US and elsewhere in the world. The financial impacts of the ongoing crisis are widespread. However, financially vulnerable groups – in particular, Gen Z – may be feeling the effects more than others, hindering their ability to save money and, eventually, flee the nest.
According to a survey conducted by Qualtrics on behalf of Credit Karma, 29% of zoomers live at home with parents or other relatives, described as a long term housing solution. Another 27% live with a romantic partner and just 13% live in a household with one or more roommates. This could be the result of elevated rent prices, which rose a record 11.3 percent last year and continues to rise, especially in big cities like New York and Los Angeles. This could fuel a failure to launch among Gen Z as they struggle to make the transition into new jobs, cities and out of home.
Hello freedom, goodbye paycheck
Of those who have successfully fled the nest, 44% rent the property in which they currently live while a surprising 23% own the property in which they live. When it comes to paying for housing, 32% estimate half of their monthly income goes towards rent or a mortgage. That’s compared to 27% who spend a quarter of their monthly income on housing and another 21% who spend a third of their income. That’s a lot of money, especially when you consider that 61% of all Gen Z respondents have a household income (HHI) of $50,000 or less. That may be why 37% of respondents admitted to getting financial assistance from family or friends to pay for housing.
“I just paid rent and I’m paying it again, this sucks,” said Linsey, a 25 year-old living outside of her parents’ home for the first time ever. Like many others, Linsey waited to move out of her parents’ house in Los Angeles until the pandemic was over. Now, after one month of living in New York, Linsey says, “It’s time to get realistic about how I spend my money, I can’t just be eating out everyday.”
When it comes to actual dollar amounts paid, the average monthly housing cost for zoomers comes in around $1,060, lower than the national average. However, BIPOC respondents tend to spend more on housing each month than white respondents. According to the study, Black respondents pay an average of $1,174 per month toward housing and other POC respondents, those who identified within the “other ethnicity” category, pay an average of $1,112 per month. That’s compared to an average monthly payment of $965 for white respondents.
99 problems and savings is one
With zoomers allocating much of their funds toward housing, few are able to save. According to the study, 28% of Gen Z say they are unable to save money right now. More than half of those who are unable to save money say they’re unable to do so because of inflation. Other reasons include not earning enough money (47%), income not keeping pace with inflation (40%) and rising rent prices (39%). Despite struggling to save, the median amount of money Gen Z estimates they currently have in savings is $1,375. This means most zoomers are just one rent payment away from depleting their savings, should it come to that.
Another factor getting in the way of Gen Z and their savings? Their desire to spend. According to the study, 20% of zoomers who have struggled to save say they’re unable to put money away because they’re spending more on things like shopping, travel and concerts.
Saving is hard, but how’s our spending?
When asked how their spending habits have changed as a result of inflation, nearly one-third of zoomers said they are spending more now, while 23% saying they’re spending about the same.
What’s more, despite the rising cost of living, nearly 40% say they’re willing to spend more money on experiences than necessities (gas, bills, etc.). This could spell trouble for those who are relying on credit to pay for their purchases, which is the case for 40% of zoomers who say, due to rising inflation, they’re more reliant on credit cards and other forms of credit, including buy now, pay later services, to pay for purchases.
Conversely, there’s a cohort of zoomers whose spending has decreased. According to the study 45% of Gen Z say they’re spending less as a result of inflation and they’re cutting costs in the following categories: dining out, groceries, experiences and travel. Many of these savers are aspirational savers with 46% saying they’re currently saving up to buy a house.
“When it comes to spending less, it’s all about prioritization,” said Linsey. “For example, if you want to stop for happy hour on your way home from a long day, don’t take a cab to happy hour. Instead, use that cab fare for your drink.” That’s just one way Linsey’s gotten crafty about cutting costs. She’s also had to give up sessions with her personal trainer and settle for a basic gym membership and she says she’s become much more vigilant of her bank statements. “Taking the extra step to be mindful of my spending, is the only way I’m able to save.”
“Right now many zoomers, especially recent graduates, are attempting to make their first real transition into adulthood. For some that includes starting their first job or moving to a new city and for others that means simply moving out of their family home,” said Colleen McCreary, consumer financial advocate at Credit Karma. “However, each of these major milestones come at a cost, which are driven up by current economic conditions, making it harder than ever for young people to become financially independent. If there’s one silver lining, it’s this: Gen Z is entering one of the best job markets in recent history and that means they have the ability to ask for what they need when it comes to salary and benefits – within reason.”
This survey was conducted online within the United States by Qualtrics on behalf of Credit Karma from June 10 to June 15, 2022 among 1,022 U.S. adults between the ages of 18 and 25.