Gen Zers risk starting further and further behind previous generations building a life for themselves as soaring rents chew into their disposable income, leaving them deeper in a financial hole they are still digging.
Housing inflation has proven to be one of the stickiest components to drive up the cost of living, with rents outpacing salaries in all but six of the top 50 metropolitan areas. Rising food prices and heavy student loan debt also factor in as young Americans are forced to tighten their belt by reducing expenses to their essentials.
According to new data from credit reporting agency TransUnion, these higher costs matched with their entry-level salaries have forced young Americans born between 1997 and 2012 to rely much more often on expensive forms of revolving lines of debt—such as credit cards—to make ends meet.
“This is a generation that is feeling financial stress in a more acute way than millennials did a decade ago,” Charlie Wise, head of global research at TransUnion, told the Wall Street Journal.
The average open balance on U.S. credit cards for Gen Z consumers grew to $2,834 last year versus $2,248 a decade earlier. The added $586 is a figure that has been adjusted to take account of inflation.
Debt burdens in general have become harder to shoulder for Americans as a whole, with U.S. consumers’ median minimum monthly debt payments growing by 32% between 2020 and 2023, according to Wise’s company. This easily surpassed the 18% rate of inflation over that same period.
But the crunch has been felt disproportionally by Gen Z as they leave college and enter the workforce. While boomers aged 60 and above saw their monthly payments rise by only 11%, below the overall cost-of-living increase, for Americans ages 18 to 29 that figure was a staggering 74%.
This confirms earlier data from Bank of America that Zoomers live precariously, with roughly a quarter ending up having to borrow money from friends and family because they don’t have enough to live off in an emergency.
Significant declines in happiness
In Bank of America’s annual Better Money Habits survey published in October, nearly three out of four said they have changed their spending habits to offset higher living expenses, by doing such things as cooking at home more frequently, limiting groceries to essential purchases, and spending less on clothes.
Should this persist, their finances could create a structural impediment to longer-term U.S. economic growth. An inability to build a financially secure foundation is often reason to delay plans for starting a family, inadvertently contributing to a further drop in U.S. birth rates, now at their lowest since records began a century ago.
Last month, market research firm Gallup partially blamed negative sentiment from Americans below the age of 30 for the U.S. falling off the list of the world’s top 20 happiest countries for the first time in the list’s 12-year history.
“Generation Z, the future of our country, has witnessed significant declines in happiness, and we must learn why,” Arthur Brooks, professor at the Harvard Business School, and a Gallup study partner, said last month.
