State of Gen Z personal finances

Generation Z is no longer just children and teenagers. Gen Z adults (ages 18-24) are graduating from high school and starting college or a career. This is the time when they may start to feel some financial independence for the first time, but what are they doing with it? It’s a critical question given the negative impact the coronavirus pandemic has had on this age group, including delayed financial milestones and high unemployment rates.

To answer this question, I compiled data from our recent surveys and tried to put the puzzle together.

This is what I have gathered.

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State of Gen Z personal finances

Gen Z is hesitant about taking on debt

I often hear the sentiment from my Gen Z friends that they generally avoid debt, and especially credit card debt. It turns out that it’s not a consequence of you promoting the best credit cards so much that they don’t want to hear about them again. It’s a common sentiment among Gen Zers and we have data to prove it.

For example, a Bankrate survey from early 2020 showed that 45% of Gen Z had no debt before and during the pandemic in May 2020.

Additionally, according to a CreditCards.com survey, 50% of Gen Z had no personal debt as of December 2020. The same survey reported that the Gen Z’s top source of debt was, you guessed it, student loans. —24 percent of those surveyed admitted to having student debt, with credit card debt trailing behind at 12 percent.

Gen Z isn’t big on savings either

The best preventive medicine against indebtedness is saving. Still, the younger generation doesn’t seem to be in a rush to save for a rainy day, like many other Americans of all ages.
Our survey from last year showed that 32 percent of Gen Z had no emergency savings before or during the pandemic and 20 percent reduced the savings they did have. Ironically, 19 percent of Gen Z respondents in the same survey reported that they increased their credit card debt in the pandemic. While this is just a guess, I think these last two numbers may be connected. When an emergency strikes and they don’t have a financial safety net to fall back on, many people choose to rely on their credit cards. Perhaps Generation Z follows the same behavior patterns.

Gen Z may be responsible for credit card holders

When Gen Zers get into credit cards, they are apparently drawn to credit card rewards. Our survey last month showed that 36 percent of Gen Z have a rewards card. That may not sound like a lot, but remember Gen Z is young, and building good enough credit for a rewards card can take some time.
Gen Z rewards cardholders are also cautious with their credit cards, with 81 percent of respondents saying they tend to carry no balance. This may mean that they follow best credit practices, since paying off your card in full each month is good for both your credit and your budget. On the other hand, this can also mean that they simply don’t use the credit cards they do have, especially considering their preferred payment method.

Gen Z pays mostly with debit cards

The majority of Gen Z prefer to pay with a debit card in common categories like gas (32%), groceries (44%), and restaurants (46%).

However, credit cards are their preferred payment method for travel expenses, with 23 percent choosing a card to pay for airfare and hotel. Note that many Gen Zers spend nothing on travel, with 50 percent reporting they don’t buy airfare and 45 percent not booking hotels. Considering the pandemic has robbed us all of over a year’s worth of travel and vacations, this is hardly surprising.

Despite using credit cards for travel expenses, Gen Z has chosen cash back as their preferred redemption option during the pandemic, which has been a trend for every generation. In 2020, 30% of Gen Z redeemed rewards for less than $300 in cash back or gift cards, and 18% redeemed rewards for $300 or more in cash back or gift cards. As is also the case with other generations, many Gen Zers (30 percent) have been holding on to their rewards during the coronavirus crisis.

Generation Z is off to a rocky financial start

Unfortunately, the pandemic has delayed much more than travel and vacations. Another survey we conducted this year found that the pandemic has put a pause on financial milestones for many Americans.

This is especially true for young people. For many Gen Zers, the coronavirus crisis has meant a slower journey to financial independence. We found that 54 percent of Gen Zers have delayed a financial milestone in the pandemic.

For example, 21 percent of those surveyed said they delayed seeking career opportunities, and another 21 percent decided to wait before continuing their education. Seventeen percent also put the brakes on buying a car, which I suspect could be a first car for many of them.

Additionally, more Gen Zers (32 percent) have moved than any other generation during the pandemic. However, 14 percent of Gen Z respondents returned home after moving, which may mean that moving was no longer financially feasible for them or that the pandemic changed their plans. Additionally, the majority of those who moved (30 percent) said it was to be closer to family and friends, and 25 percent reported it was to make living more affordable.

I find it sad that COVID-19 has had this effect on the financial lives of young people. It is one thing to fight against its economic consequences when you have something to lose, and another when you have not even had a chance to start.

Some Gen Zers graduated into the chaotic job market and others found themselves unemployed. They were even called the most unemployed generation. They may very well be headed for the same financial struggles that millennials have been going through.

Gen Z has little to no financial orientation

In difficult situations like those facing Generation Z, good financial advice can be invaluable and prevent many costly mistakes. Unfortunately, financial education has been a sore spot for many Americans, including Generation Z.

A recent CreditCards.com survey found that 28 percent of Gen Zers learn about finances through social media, which the majority of respondents also view as the least trusted source.

Without a doubt, social media platforms can offer useful information in an easily digestible form. Some authorized sources may also have accounts; for example, did you know that Bankrate is on TikTok?

However, in the end, it is always up to the user to find trustworthy accounts and creators. Knowing the flurry of content we consume on social media every day, I doubt many Gen Zers take the time to verify the reliability of every video that appears in their feed.

What’s worse, 22 percent of Gen Z don’t receive any kind of financial advice. In these challenging economic times, having some guidance can be crucial.

Lack of financial knowledge is one of the most common reasons behind poor money management (I’m speaking here from my personal experience), so I hope more Gen Z seek out that knowledge, beyond their social networks.

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