To keep up with the high cost of living, many young people turn to a potential safety net: their parents.
According to a new report from Bank of America, nearly half, or 46%, of Gen Zers ages 18 to 27 rely on financial assistance from their families.
52% of respondents said they don’t earn enough money to live the life they want, citing everyday expenses as the main barrier to their financial success.
“The rising cost of living is definitely impacting Gen Z,” said Holly O’Neill, head of retail banking at Bank of America.
The financial institution surveyed more than 1,000 Gen Z adults in April and May.
Why Times Are So Tough for Generation Z
Many consumers are feeling stressed by rising prices—especially food, fuel, and housing. However, those just starting to buy homes face additional financial challenges.
Not only are their wages lower than their parents' incomes when they were in their 20s and 30s, adjusted for inflation, they also carry larger student loan balances.
Even compared to millennials, Gen Zers spend far more on necessities than young adults did a decade ago, other reports show.
They also have the debt to prove it. The Federal Reserve Bank of New York reported in May that about 15% of Gen Zers have maxed out their credit cards and are at risk of defaulting on payments, more than any other generation.
“What the default rates show is that there is increasing levels of stress among some segments of the population,” New York Fed researchers said at the time.
“The high cost of housing is definitely a barrier.”
In the years since the COVID-19 pandemic, homeownership has been one of the greatest wealth-creating tools — and those who have been pushed out of the housing market by rising prices have had a disproportionately difficult time achieving the same level of financial security, according to Brett House, an economics professor at Columbia Business School.
“This poses a huge challenge to wealth accumulation among Generation Z,” he added.
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Bank of America also found that housing is the expense that most young people today need help covering, second only to food and groceries.
“The high cost of housing is definitely a barrier for them,” O’Neill said. “We also found that the majority of Gen Zers are not paying for their own housing.”
Experts recommend spending no more than 30% of your net income on housing, but many young adults who cover their own expenses spend much more than that. Two-thirds of respondents to a Bank of America survey said they allocate more than 30% of their paychecks to housing, and nearly a quarter spend more than 50%.
O'Neill said she advises her Gen Z kids to adhere to the 50-30-20 rule, which recommends allocating 50% of your paycheck to necessities, including food, housing and transportation, 30% to discretionary spending, and the remaining 20% to savings.
Fewer Americans feel financially comfortable overall.
But it's not just Gen Z struggling. A majority of Americans believe they don't earn enough to live the life they want these days, according to a separate survey by Bankrate.
Only 25% of all adults surveyed said they were completely financially secure, down from 28% in 2023, the report said.
Survey respondents said they need to earn an average of $186,000 to live comfortably, according to Bankrate. But to feel wealthy, they need to earn more than half a million dollars a year, or $520,000 on average, the survey found.
Similarly, recent spikes in inflation and specific challenges related to housing costs and college affordability have been significant obstacles to achieving financial security, according to Bankrate.
“Many Americans are stuck somewhere between persistent price shock, lack of income gains, and a sense that their hopes and dreams are far beyond their financial reach,” said Mark Hamrick, senior economist at Wright Bank.
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